As the curtains rose on the anticipated Autumn Statement of 2023, the stage was set for what was being hailed as the ‘Autumn Statement for Growth’. The statement encompasses reductions in National Insurance rates, allocations for clean energy support, and raises in both the National Minimum and Living Wage.
But what does this mean for SMEs? We break down the key parts of the Autumn Statement 2023 that SMEs owners need to know right here.
How does the Autumn Statement 2023 impact the self-employed?
The Autumn Statement has seen some significant alterations for the self-employed community brought in. The decision to abolish the £3.45 weekly Class 2 NIC and reduce the Class 4 rate from 9% to 8% presents a substantial shift, as this change not only signifies potential financial relief but also prompts a crucial reassessment for small business owners about whether being a Limited company is still the right choice.
Previously, the benefits of being a Limited company, such as tax advantages and reduced personal liability, often outweighed those of being self-employed. However, with the recent changes in NIC rates favouring the self-employed, the financial advantages of a Limited company structure are now being re-evaluated. So, if this sounds like you, it may be time to sit down and work out whether you’re still better off being a Limited company.
What do the changes mean for employees?
For employees, the reduction in NICs from 12% to 10% will be greeted with a warm welcome. Effective from January 2024, this decrease aims to boost take-home pay for individuals falling within the earnings bracket of £12,570 to £50,270. The savings of up to £754 annually for eligible earners, with an average £450 surplus for those earning around £35,400, promises real benefits for the workforce.
Beyond NICs, the Statement includes significant updates to the National Living Wage and National Minimum Wage:
Increase in NLW rate: The National Living Wage will see a rise from the previous £10.42 per hour to £11.44 per hour, effective from April 2024. This substantial 9.8% increase will provide an annual boost of over £1,800 for full-time workers.
Eligibility expansion: The eligibility criteria for the National Living Wage will also be broadened. The minimum age required to qualify for this pay rate will be lowered from 23 years old to 21 years old. For full-time workers aged 21, this will mean a 12.4% increase and a financial gain of nearly £2,300 annually.
Apprentices: Apprentices will see their new hourly rate rise by 21.2%, meaning their new rate will be £6.40 an hour.
So, if you employ individuals who are on the NLW/NMW, you will need to ensure you adjust wages accordingly, to comply with the new updates.
Limited companies: Full expensing now permanent
In 2021, The Government introduced the super deduction which aimed to incentivise business investment. At Budget 2023, this measure underwent a transformation, evolving into full expensing for a three-year period starting from April 1, 2023. This new scheme enabled businesses to write off the entire cost of qualifying plant and machinery investment.
In the Autumn Statement, the Government announced that this scheme will now become permanent. This change holds substantial significance, especially for small and medium-sized enterprises, offering a solid framework to facilitate growth, innovation, and investment. By allowing businesses to offset capital expenses immediately rather than spreading them out over several years, this measure enables businesses to reinvest capital, enhance productivity, and stimulate economic expansion.
If you have questions about any aspect of your finances, please get in touch with the Trinity team. We’d love to help!