The Chancellor’s Autumn Financial Statement, released on November 24 November 2023, contained several policies aimed at small companies and the self-employed in the UK. As your trusted small business accountants and financial advisors, we set out below an in-depth analysis of the key measures relevant to your accounting and business.
Increase in National Minimum Wage
Nearly three million workers in the UK will benefit from the upcoming increase in the national living wage that was announced by the Chancellor and is detailed in the table below. Strategic planning is crucial if you employ staff at or slightly above the National Minimum Wage.
A notable change is that 21 to 22-year-olds will no longer have a separate lower minimum wage band; instead, they will be entitled to the full National Minimum Wage rate for those aged 23 and over of £11.44 per hour from the specified date. It’s worth mentioning that the London Living Wage, although not legally binding, stands at £13.15 per hour, reflecting the best available evidence on living standards in the UK, specifically in London.
| Apprentice | Under 18 | 18 to 20 | 21 to 22 | 23 and over | |
| Apr 2022 – March 2023 | 4.81 £ | 4.81 £ | 6.83 £ | 9.18 £ | 9.50 £ |
| Apr 2023 – March 2024 | 5.28 £ | 5.28 £ | 7.49 £ | 10.18 £ | 10.42 £ |
| Apr 2024 – March 2025 | 6.40 £ | 6.40 £ | 8.60 £ | 11.44 £ | 11.44 £ |
Tax Relief for Reinvesting in Your Business
One of the most welcome announcements was that full expensing of expenditures on equipment, machinery and technology will become a permanent tax break from 2026 rather than a temporary policy. Sole traders and small companies can continue deducting 100% of qualifying capital investments from taxable profits. Even if your business is currently making use of the £1 million Annual Investment Allowance, full expensing from 2026 gives longer-term assurance that reinvesting in productivity gains will lower your tax obligations.
Updates to R&D Tax Credits
The research and development tax credit schemes have been made more generous for smaller companies from April 2024. Most importantly, the minimum threshold of expenditure for the “R&D intensive” relief has been reduced from 40% to 30% of total spending. The enhanced 230% deduction rate will now be achievable for more SMEs investing in pioneering new products, services and processes. Speak to our R&D team to check if your innovation spending qualifies and apply for this valuable relief against tax bills.
Reduced National Insurance Contributions
National Insurance Contributions for employees and the self-employed will be reduced in 2024, which is welcome news for small businesses and sole traders.
- Class 1 Employee NICs: Reduced from 12% to 10% starting January 6, 2024
- Class 4 Self-Employed NICs: Decreased from 9% to 8% effective April 6, 2024
- Class 2 Self-Employed NICs: Reduced to zero and abolished on April 6, 2024
Late Payments Measures
£32.1 billion of unpaid invoices are currently owed to UK businesses, according to research from Simply Business, and 30 per cent of businesses are owed as much as £45,000 at one time. To address this issue, new rules will target larger companies failing to meet timely payment obligations to small business suppliers. Starting in April 2024 companies with a turnover exceeding £5 million will be disqualified from bidding on public sector contracts if they consistently pay invoices after 55 days on average. This limit will progressively tighten to 45 days and then 30 days to align with the Prompt Payment Code standards.
Training Costs Deductibility:
HMRC has agreed to update its guidance on tax deductibility of skills training costs for the self-employed which should give sole traders and independent contractors clearer confirmation of their ability to offset expenses like course fees, software learning packages, or professional seminars.
Continued Support on Business Rates:
Business rates have yet to be reformed. However, in the meantime the business rates small business multiplier in England will be frozen, eliminating the planned CPI inflation increase. Additionally, the 75% discount for retail, leisure, and hospitality SMEs in England has been extended by another year until March 2025.
Easier Access to Cash Basis Accounting:
Starting in April 2024, the £150,000 turnover eligibility threshold for cash-based accounting will be eliminated. Sole traders and partnerships can calculate taxable profits based on cash inflows and outflows instead of invoice dates, providing a smoother income experience and simplifying tax filings. For personalized advice on transitioning to cash-based accounting, contact AcuAccounts.
The Federation of Small Business (FSB) on the Autumn Statement:
Overall, the FSB welcomed the Autumn Statement, which included several policies the FSB had campaigned for on business rates, late payments, and taxes for the self-employed. The FSB praised as a positive step the new public procurement rules to incentivise big companies to pay suppliers promptly.
The Institute of Directors (IoD) on the Autumn Statement:
The IoD welcomed the government’s efforts to boost business investment, including making full expensing of capital expenditures permanent, tax cuts for the self-employed, and establishing investment zones. However, the IoD criticised the lack of action on tackling skills shortages.
Want to find out how the budget will impact your business finances?
Get in touch at info@acuaccounts.com and book a consultation with our team. You can also call us directly on 0203 907 9027.
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