Chancellor Jeremy Hunt's Autumn Statement has set out the government's plan to curb inflation and navigate the anticipated recession, through a mix of tax increases and spending cuts.
The budget included a mix of tax threshold changes and cuts to allowances, a rise in the National Living Wage and support with business rates.
Find out the seven key changes that could impact businesses and traders in the future.
1. National Living Wage increase
The National Living Wage, currently £9.50 for workers over 23, will also rise by just under £1 to £10.42 from April 2023.
The government says that it will benefit around two million of the lowest paid workers and represents an annual pay rise worth more than £1,600 to a full-time worker.
Here are the new rates:
|Wage||Current rate||Rate from April 2023|
|National Living Wage||£9.50||£10.42|
2. Freeze to income tax thresholds extended
The freeze on the personal allowance, and thresholds for income tax and National Insurance, will be extended to April 2028. The freeze on these taxes had been due to lift in 2025-26.
With thresholds failing to rise in line with salaries, a significant number of people could end up in a higher tax band by the end of this period.
Additional-rate tax threshold reduced
The additional-rate income tax threshold will reduce from £150,000 to £125,140 from April 2023. It's estimated that around 250,000 taxpayers will be pushed into this higher tax band, paying 45% on any income above the new limit.
The Chancellor said this would mean anyone earning £150,000 or more could expect to pay £1,200 more per year in income tax.
- Find out more: Chancellor announces major income tax changes
3. Cuts to dividend and capital gains tax
The government has cut the dividend allowance, which is the amount you can earn before paying tax.
The dividend allowance will be cut from £2,000 to £1,000 next year, and then to £500 in April 2024.
The government also announced that the capital gains tax (CGT) allowance will be slashed to £6,000 in 2023-24, down from £12,300. The allowance will be cut again in 2024-25 to £3,000.
Business owners might need to pay capital gains tax if they sell business assets such as land and machinery.
- Find out more: capital gains tax and dividend allowance changes
4. Threshold frozen for VAT registrations
The VAT registration threshold will be maintained at £85,000 for two years from April 2024 - this is the turnover at which businesses must register to pay the tax.
This means more small businesses will have to register for and pay VAT, as their prices and sales will likely rise with inflation but the VAT threshold will not.
5. Support for business rates bills
Businesses pay business rates on the physical storefronts they use. They’re set based on a property’s ‘rateable value’ (determined by the Valuation Office Agency) – aka its rental value – and calculated based on a multiplier (set by the government).
Valuations will be updated next year on 1 April 2023, but even then they’ll be based on the rental market from 2021.
If a property is found to have changed in value, its business rates won’t automatically change in turn. Instead, they will gradually rise or fall thanks to something called transitional relief.
The government announced a targeted support package worth £13.6bn over five years to support the transition during the autumn budget:
- Multipliers will be frozen from 2023-24, which the Treasury says will be a ‘tax cut worth £9.3bn over the next five years’.
- Transitional relief will be reformed so businesses seeing lower bills as a result of revaluation will benefit from that decrease straight away in full, by abolishing downard transitional relief caps. The government also announced a £1.6bn scheme to cap bill increases for businesses that will see higher bills as a result of the revaluation.
- There will be protection for small businesses who lose eligibility for either Small Business or Rural Rate Relief due to new property valuations through a more generous Supporting Small Business scheme worth more than £500m.
Read more on the government website
6. A review into energy bills support scheme
The Energy Bill Relief Scheme, brought in by former Prime Minister Liz Truss, helps businesses with the price of energy this winter until March 2023.
It means the government provides a discount on wholesale gas and electricity prices for all non-domestic customers (including all UK businesses; the voluntary sector, such as charities; and the public sector, such as schools and hospitals).
It applies to fixed contracts agreed on or after 1 April 2022, as well as deemed, variable and flexible tariffs and contracts. It applies from 1 October to 31 March, running for six months, and is applied automatically to bills.
A review will now take place to determine the level of support beyond 31 March.
Published budget documents state: ‘While the government recognises that some businesses may continue to require support beyond March 2023, the overall scale of support the government can offer will be significantly lower, and targeted at those most affected to ensure fiscal sustainability and value for money for the taxpayer.’
- Find out more: all you need to know about the energy support scheme
7. Tax on electric vehicles
From 1 April 2025, owners of new electric cars will pay the lowest rate of tax, currently £10, in the first year of ownership (first-year rate), then £165 a year thereafter (standard rate).
Electric car owners will also no longer be exempt from the ‘luxury car tax’ (officially called the ‘expensive car supplement’), which currently sees owners of cars that cost more than £40,000 pay an additional £355 a year for five years.
- Find out more: what the autumn statement means for motorists