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Autumn Budget 2022 – What SMEs need to know

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On the 17 November 2022 the new Chancellor, Jeremy Hunt delivered his first Autumn Statement. These measures look to recover the UK’s finances and grow the economy to help reduce the estimated £55 billion debt.

The new announcements will affect the energy sector, business rates, corporation and capital gains taxes, Research and Development (R&D) tax relief for SMEs, and Employers National Insurance Contributions (NICs).

Inflation has reached its highest level for 45 years (11.1%) and GDP predicted to shrink by 1.4% in 2023, business owners will consider specialist financial funding to help their SMEs such as hire purchase, operating leases, asset refinancing, and commercial.

We outline what was included in the Autumn Statement for SMEs.

Energy Price increases

No fresh support for SMEs facing increased energy prices was announced in the Chancellor’s statement.

With high energy prices expected to continue beyond April and the end of the Energy Bill Relief Scheme, SMEs will face the challenge of whether to keep passing on price increases to customers, absorb the extra cost themselves, or make other cost-saving measures – including temporarily scaling back their operations.

Business Rate freeze and revaluation

The Chancellor announced a freeze to the business rate multiplier, with bills now set to increase by less than 1% and pledged a revaluation of businesses to be undertaken from April 2023. 

Corporation and Capital Gains taxes

Though the headline rate of CGT will remain at the previously announced rate of 25% from April 2023, the chancellor said that the tax-free allowance will be cut in April 2023 from £12,300 to £6,000 – with a further cut in April 2024 to £3,000.

Corporation tax will rise to 25% on profits over £250,000.

The chancellor also announced the halving of the nil-rate band for dividend income, with a cut from £2,000 to £1,000.

Pressure on payroll

Central to the Chancellor’s plan to repair the nation’s finances is a freeze to income tax thresholds. By maintaining current threshold levels, more workers will soon be paying higher rates as their wages increase – known as fiscal drag.

With increased taxes on employees, SMEs could face calls from employees to help make-up the difference in their wage packets – putting further pressure on already squeezed company finances.

Further pressure on payroll finances will come from a rise the National Living Wage in April for those over 23 from £9.50 an hour to £10.42.

Research and Development (R&D) tax relief

With previous R&D tax relief schemes for SMEs being subject to fraud, the chancellor announced cut in the deduction rate to 86% and in the credit rate by 10% - though the expenditure credit will rise concurrently from 13% to 20%.

In making the announcement the chancellor argued that Office for Budget Responsibility analysis found that the cuts to R&D tax relief schemes would not have a detrimental impact to investment – and said that the government will work with SMEs to better understand their R&D requirements.

Employers National Insurance Contributions

The threshold for Employers NICs were frozen by the chancellor until April 2028, with an estimated 40% of all UK businesses set to pay no employer NICs – though the government is set to keep Employment Allowance at £5,000.

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