If there were ever any doubt, that our politicians are no longer on the side of business. This budget clearly demonstrates it.
Autumn Statement what it means for small business
Bringing more businesses into collecting VAT, halving Capital Gains Tax thresholds and scrapping Business Rates relief for vulnerable post-Covid sectors such as retail, all on the cards.
As expected, Chancellor Jeremy Hunt has hit small business owners with tax increases in this morning’s Autumn Statement.
The Chancellor announced £24bn of tax rises and £30bn of public spending cuts delivering his Autumn Statement in the House of Commons this morning.
The 45 per cent top-rate of tax, which former Prime Minister Liz Truss and Chancellor Kwasi Kwarteng tried to abolish less than two months ago, will now kick in at income of £125,000 rather than £150,000.
Allowances and thresholds for income tax, National Iinsurance and inheritance tax will be frozen until April 2028, two years longer than previously planned.
Autumn Statement what it means for small business
The Chancellor will go ahead with the uprating of business rates next year, ignoring calls for an extension of relief on the tax, which is payable on commercial properties.
From April, business rates are expected to be uprated by the consumer prices index measure of inflation, which as of September stood at a 40-year high of 10.1 per cent.
On top of this, certain sectors, including shops, restaurants, cafés, bars, pubs, cinemas and gyms, are benefiting from 50 per cent relief, which is due to expire on April 1.
The CBI published a report last week suggesting that the retail sector faces increases of up to 25 per cent over the next two years.
Freezing VAT threshold
The Chancellor will hold the threshold at which businesses must register to pay VAT at £85,000 of turnover until 2026 – a stealth tax raid on small businesses which will force thousands more to pay VAT as he tries to balance the country’s books, according to the Daily Telegraph.
Thousands more small businesses will have to pay VAT for the first time as their turnover increases in line with rising prices.
Capital Gains Tax
The Annual Exempt Amount for Capital Gains Tax will be cut from £12,300 to £6,000 next year and then to £3,000 from April 2024, dragging tens of thousands in to paying the tax – a concept called “fiscal drag”.
Capital Gains Tax (CGT), which small business owners pay when they sell their company, is expected to raise £15bn in 2022-23, or 1.5 per cent of all receipts. About 300,000 people a year currently pay CGT when they sell an asset for a profit.
The headline rates have stayed the same. Founders currently pay 10 to 20 per cent when they sell out.
The government has mounted a multibillion-pound raid on income from shares. The tax-free dividend allowance will be cut from £2,000 to £1,000 next year and then to £500 from April 2024.
If the dividend allowance is cut to £1,000, then a basic rate taxpayer will end up paying £87.50 more in tax, according to wealth manager Quilter. This will rise to £337.50 for higher-rate taxpayers and £393.50 for additional-rate payers.
Some point out that taxes on company dividends mean double taxation for self-employed sole traders, as they already pay tax on company profits before the taxman dips its fingers into dividend income.
Companies have to pay 13.8 per cent in National Insurance contributions on earnings of all workers over £9,100 per year. The Government has frozen this threshold until 2027-28, meaning companies paying more over the coming years for each person they employ.
R&D tax credits
The Chancellor will make research and development tax credits less generous following a rise in claims in recent years. The R&D tax credit scheme is meant to incentivise small and medium-sized businesses to innovate. In the year to March 2020, £7.4bn of support was claimed via 85,900 claims through the programme, an increase of 16 per cent from the previous year thanks to more claims from small businesses. The Financial Times reported that the Treasury fears that without reform, the small business scheme alone could cost the taxpayer nearly £9bn by 2027.
National Living Wage
The National Living Wage will increase by 9.7 per cent next year. From April 2023, the hourly rate will be £10:42, which represents an annual pay rise worth over £1,600 to a full-time worker.
Investment zones scrapped
Hunt’s predecessor Kwasi Kwarteng announced in his mini-Budget that the UK would be establishing 200 investment zones with holidays on business rates and employers’ National Insurance contributions for new workers earning less than £50,000 a year. The investment zones would have cost Government £12bn a year in lost tax revenue.
Research & Development budget
Jeremy Hunt confounded expectations by protecting the Government research and development budget at 2.4 per cent of GDP and increase public funding for R&D to £20bn by 2024-25