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Chancellor Jeremy Hunt has unveiled the government’s fiscal plans for the upcoming year in the Autumn Statement delivered on November 22, 2023. With speculations of an impending general election, this statement is likely the last mini-budget before the potential election in October next year.

The Office for Budget Responsibility (OBR) simultaneously released its latest economic outlook for the UK. Against a backdrop of falling inflation to 4.6% in October, down from 6.7% the previous month, the Chancellor announced tax cuts due to the available ‘fiscal headroom.’

Here’s a breakdown of the key updates that could impact small businesses:

1. National Insurance Reform for the Self-Employed:

  • Abolition of Class 2 National Insurance, saving the average self-employed individual £192 annually.
  • Class 4 National Insurance reduced to 8% for profits between £12,570 and £50,270 from April 2024, saving an average of £350 per self-employed person.

2. Business Rates Relief:

  • Small business multiplier frozen for an additional year.
  • Extension of 75% business rates relief for eligible retail, hospitality, and leisure businesses (up to £110,000 per business) for 2024-25.

3. Living Wage Increase:

  • National Living Wage to increase to £11.44 per hour for workers over 23 in April 2024.
  • Extension to include 21 and 22-year-olds for the first time.

4. Late Payment Reforms:

  • Crackdown on late payments with the Cash Flow and Prompt Payment Review.
  • Extension of 30-day payment terms to all subcontractor invoices within the public sector supply chain.
  • Companies bidding for large government contracts must demonstrate payment within an average of 55 days, tightening to 40 days in April 2025 and 30 days beyond.

5. Business Tax Changes:

  • Permanent extension of the ‘full capital expensing’ business tax break, allowing businesses to claim back 25p in corporation tax for every £1 invested in IT, machinery, and equipment.

6. Alcohol Duty Frozen:

  • Temporary freeze on alcohol duty extended until August 1, 2024.

7. Simplified R&D Relief:

  • Merging of the current R&D Expenditure Credit and SME schemes from April 2024 to simplify the process for businesses.

Despite the positive initiatives, some concerns linger. SMEs are owed £32 billion in late payments, and while the Chancellor introduced rules for government contract bids, challenges persist in recouping outstanding payments.

The business rates support package and tax relief are welcomed, but issues like rising energy costs for small businesses remain unaddressed.

In conclusion, while the reforms aim to fortify the stretched SME sector, there are lingering challenges that demand attention for the sustained growth of small businesses in the UK.