What the Autumn 2023 Budget means to you

The Chancellor delivered his Autumn Statement for Growth aimed at building a stronger and more resilient economy.

He highlighted that the plan is to “unlock growth and productivity by boosting business investment by £20 billion a year, getting more people into work, and cutting tax for 29 million workers”.

But what does that mean to you, running your small business?

“Full expensing” deduction

We usually call this “first year allowances”.  The announcement on Wednesday was that this is to be made permanent, and not end in March 2026, as previously announced.

What it actually means is that you can claim the full cost of qualifying new plant and machinery in the first year you buy it. Qualifying purchases normally relate to environmentally friendly costs.

So if you buy a new electric vehicle for your business, costing £120,000, you deduct the full cost from your profits before working out your tax.

If you’re paying 25% corporation tax, this is a tax saving of  £30,000!

Annual investment allowance

This allows you to claim the full cost of a new asset from your profits, up to £1 million. This has been confirmed as a permanent limit of £1 million, which is great news for many small businesses, meaning that all qualifying spend on assets will be included.

Business rates relief

Small business rates (SBR) relief for hospitality, retail and leisure is set to be extended to March 2025. The discount is 75%, and the SBR multiplier will also be frozen for a further year.

Government grants for electric vehicle charging points.

You can continue to claim 100% of the cost of installing an electric vehicle charging point up until 31 March 2025, or 5 April 2025 for sole traders and partnerships.

Recovery loan scheme

This is being extended until June 2024. You can find out all the details and eligibility criteria on the Business Bank website.

Also chat with us if this is of interest, as we partner with different funding providers.

National insurance

For employers the national insurance rates and thresholds have not changed:

Employers’ NIC: 13.8%, on earnings above £12,570.

Employment allowance remains at £5,000, so you don’t pay your first £5,000 of Employers’ NIC in each tax year.

See below for changes to NIC for employees and self-employed.

What does the Budget mean for you as an individual?

Income tax thresholds:

These remain frozen for a further year?

  • Personal allowance: £12,570
  • Basic rate allowance: £50,270
  • Additional higher rate: reduced from £150,000 to £125,140 from 6 April 2023

Personal allowance reduces for higher income

Where your income exceeds £100,000 you lose £1 of your personal allowance for every £2 over £100,000.

You’ll pay 40% tax on the additional £2 and an extra 40% on the £1 of lost personal allowance (effectively 60% tax)

At £125,140 the full personal allowance is lost.

National insurance for employees and self-employed

Class 2 NIC for the self-employed is being abolished form April 2024.

You’ll still get the benefits you’ve accumulated.

Class 4 NIC for the self employed is being cut from 9% to 8% from April 2024.

This is due on earnings between £12,570 and £50,270

Class 1 NIC for employees is being cut from 12% to 10%

This is from 6 January 2024, which will be fun and games for anyone processing payroll!

Capital gains tax exemption reduced

The capital gains tax exempt amount was reduced in April 2023 from £12,300 to £6,000.

This will reduce again in April 2024 to £3,000. This means that more of your gain will be taxed.

National minimum wage

The national living wage increases to £11.44 an hour for 21 year olds and over.

For under 20’s the rates are as follows:

  • 18-20 year olds: £8.60
  • 16-17 year olds: £6.40
  • Apprentice rate: £6.40
  • Accommodation offset: £9.99

State pension increases

Pensioners will receive a significant uplift for a second year, with an extra £900 per year from April 2024.

Pensions reform

  • The lifetime pension allowance charge was removed in April 2024, and abolished completely from April 2024.
  • The pension annual allowance increased from £40k to £60k from April 2024.

Help with childcare

  • From April 2024: working parents of two-year-olds will be able to access 15 hours of free childcare.
  • From September 2024: 15 hours of free childcare will be extended down to the age of nine months for working parents.
  • From September 2025: working parents of children aged nine months and upwards will be entitled to 30 hours free childcare per week right up to their child starting school.

You can use these hours over 38 weeks each year (during term time) or up to 52 weeks, if you use fewer total hours each week.

That’s a lot to take in!

As always, we’re here to untangle the minefield and tax jargon, and make sense of it all for you.

Please get in touch if we can take the burden off you, and make things simple! Check out how we work here, and get in touch today.