Autumn Budget 2023: How will the changes affect your business?

On 22 November, Chancellor of the Exchequer Jeremy Hunt announced the Autumn Statement. The key focus of this budget is to reduce inflation, stimulate growth and attract more investment into UK businesses.

So do any of the changes announced affect your business? In this post, we cover the points that relate to small businesses and tech, and discuss what they mean for you.

In this post

• R&D tax credits: merging the schemes and extending the enhanced credit
• SEIS & EIS: ‘sunset clause’ extended to 2035
• Full expensing made permanent
• The National Living Wage rises to £11.44 per hour
• National Insurance tax cut for employees
• National Insurance tax cut for the self-employed
• Small business multiplier for rates is frozen for another year
• Tackling the culture of late payments, from the top down
• Boost to investment in UK companies
• Government will consult on employee pensions
• Key takeaways
• Talk to an expert

R&D tax credits: merging the schemes and extending the enhanced credit

The Chancellor confirmed that the two R&D schemes (SME & RDEC) will merge to create a new scheme for all companies, regardless of size.

Under the new scheme, the credit for loss-making companies will be taxed at 19% rather than the corporation tax main rate of 25%.

At SeedLegals, we’ve been working on our R&D service to be ready for the merging of the schemes. Our team is monitoring the changes to rates and rules closely, and we’ll have an update ready to go as soon as the changes are confirmed.

Good news for companies who spend extensively on R&D, but didn’t quite meet the threshold for the ‘enhanced credit’. The R&D intensive requirements will be reduced from 40% of total spend on R&D to 30% of total spend on R&D. The government claims this will allow around 5,000 more SMEs to qualify for the enhanced rate of tax, worth £27 for every £100 spent on R&D.

SEIS & EIS: ‘sunset clause’ extended to 2035

Founders hoping to raise capital under the SEIS and EIS schemes can breathe a sigh of relief. The Chancellor didn’t mention this in his speech in Parliament but the full document of the Autumn Statement confirms the government’s support for these schemes. They plan to extend the sunset clause (essentially an expiry date) from 2025 to 2035.

Full expensing made permanent

Full expensing was introduced in April 2023 to replace the super deduction for small businesses. It was intended to only last for three years, but in this budget it was confirmed that full expensing will remain in place for the foreseeable future.

Full expensing means that the amount you invest in IT, plant or machinery equipment can be deducted in full and immediately from your profits, as well as allowing you to save 25p in every pound you spend on other types of investment.

Hunt claimed this measure is designed to increase the incentive for companies to invest.

You can read more about full expensing and how it works on the gov.uk site.

The National Living Wage rises to £11.44 per hour

The National Living Wage (also called the Minimum Wage) is set to rise from its current rate of £10.42 to £11.44

Traditionally this has only applied to people aged over 23, with employers allowed to pay younger people a lower minimum rate. However the Chancellor has now also reduced the age for the National Living Wage from 23 to 21 from 1 April 2024.

You’ll have to ensure that you meet these National Living Wage requirements if you hire staff or third party workers (such as agency staff). This could make your payroll costs more expensive.

National Insurance tax cut for employees

The National Insurance Contribution (Class 1) paid by employees has been cut by 2% from 12% to 10%. Unlike the rest of the measures which take effect from April 2024, this tax cut will be brought in by emergency legislation to start from 6 January 2024.

This cut means that employees will get more from their salary. Hunt claims that 27 million people will gain from this measure. For example, if you’re on a salary of £35,000, you’ll save £450 a year.

For businesses, it means you’ll need to update your payroll systems in advance of the January deadline.

National Insurance tax cut for the self-employed

From 6 April 2024, self-employed people with profits above £12,570 will no longer have to pay Class 2 National Insurance Contributions, but will continue to receive access to contributory benefits including the State Pension.

Small business multiplier for rates is frozen for another year

The Chancellor announced that the 75% discount on business rates for retail, hospitality and leisure which is currently in place has been extended for another year.

This is welcome news for small businesses in these sectors with a premises.

Tackling the culture of late payments, from the top down

Millions of pounds are owed to small businesses in the UK in unpaid invoices. To help ease this situation, Hunt announced measures to bring in terms for prompt payment.

Hunt recapped the introduction of the Procurement Act this year which means companies supplying the public or utility sector must be paid within 30 days. He announced that from April 2024, companies bidding for large government contracts will have to demonstrate that they pay their own invoices within 55 days, which will incrementally reduce to 30 days.

For small businesses, this top-down approach to tackling late payments means that if your customers are companies which have contracts to supply the government, then your customers will have to start paying you on time – within 30 days.

Boost to investment in UK companies

Hunt announced many measures designed to increase investment in UK businesses, particularly startups and innovative companies.

The Mansions House pension reforms Hunt announced early this year aim to flow money from pension schemes into UK industry, by setting a percentage of pension funds that must be invested in high growth UK businesses.

The Chancellor also announced plans to encourage companies to list on UK markets.

The government plans to spend £4.5 billion over the next five years to attract investment into manufacturing in key sectors including automotive, aerospace, life sciences and green energy industries. This spending will attract an estimated £2 billion in additional investment per year for over the next decade, claimed Hunt.

Hunt announced three more investment zones, as part of Levelling Up: West Midlands, East Midlands and Greater Manchester. These zones will focus on advanced manufacturing, with the aim of creating 65,000 new jobs. Wrexham and Flintshire will also be another investment zone.

Government will consult on employee pensions

The Chancellor announced a consultation on giving people a legal right to require a new employer to pay into their existing pension, if the employee prefers that. This move would be designed to simplify saving for a pension and allow people to maintain one pension pot for life.

This is an initiative to keep an eye on. If you have employees, then you already have a company pension scheme. Making payments into different pension schemes would add an extra layer of admin and complexity. But this is only at the consultation stage for now.

Key takeaways

✅Full expensing made permanent

✅R&D tax credit scheme merger is going ahead

✅SEIS and EIS extended until 2035

✅Rise in National Living Wage

✅Cuts to National Insurance for employees and Class 2 NICs for self-employed

Hunt emphasised that this budget statement focuses on growth and investment in UK business, both in terms of enabling existing businesses to grow, and to develop and encourage a skilled workforce. What was absent from Hunt’s statement was an announcement about the bands for income tax. These will remain the same so workers will take home less pay as their income increases over the next few years.

Talk to an expert

Ready to raise funding under the SEIS/EIS tax relief scheme? Or want to find out more about how R&D tax credits can boost your cash flow? Pick a time to talk to an expert.