How the Autumn Statement Impacts Businesses     

Today’s Autumn Statement, led by Chancellor Jeremy Hunt indicates how parliament proposes to balance the UK’s economy with their medium-term fiscal plan. The Chancellor highlighted the government will prioritise stability, growth and public services. Supported by economic forecasts from the Office for Budget Responsibility, the statement announces an economic outlook which is set to impact us all through higher taxation and changes to government spending, with the aim to stimulate slow economic growth.

This statement is the third budget to be announced this year in the wake of economic turmoil caused by the COVID pandemic, the invasion of Ukraine and other global market uncertainty. Within the statement, Jeremy Hunt identified a need to reverse many of the plans announced by Kwasi Kwarteng in the recent ‘mini-budget’.

Business owners across the country will be impacted by the announcements made in today’s statement, whether that’s as an owner of a small firm, or a much larger company, the amount businesses and individuals are taxed and the costs of goods they purchase are set to increase.

If you are a business owner, read on to find out more about how today’s announcement impacts businesses and what support could be available to you according to the 2022 Autumn Statement.

The first major change in taxation will see highest earners start to pay the top rate of income tax at £125,140, which is around a £25,000 drop from £150,000 meaning high earners will ultimately pay more tax. The top rate of tax is currently 45%.

Energy companies will be targeted with an expansion of the windfall tax in response to the large profits announced this year by the major oil and gas companies which supply the UK. The treasury claims this move alone will raise £14bn over the next year.

One announcement which will impact individuals and businesses on a larger scale is the freeze of the income tax personal allowance threshold. Current tax bands will remain the same until 2028, adding an additional two years to the freeze (up from 2026). This means that as wages rise, the amount of earnings individuals pay tax on will also increase, potentially pushing some earners into a higher tax bracket.

The Headline Corporation Tax Rate will remain at 25%. 70% of trading companies will also benefit from a 19% small profit rate.

The level at which employers need to pay Class 1 Secondary National Insurance Contributions will be fixed at £9,100 from April 2023, until April 2028. 

Spending cuts will focus on government departments foremost.

The Chancellor announced that the current health budget will be protected during this period and that a ‘strong NHS’ remains a priority for the government, as a result the NHS will see a budget increase of £3.3bn in 2023 and 2024.

The education budget will see the investment of an additional £2.2bn in 2023 and 2024.

Firstly, businesses should consider how these announcements impact their employees and their personal finances. A higher cost of living leads to a need to earn more money so for many, conversations about how this could be achieved may become more frequent over the next few months. Rises in the National Living Wage will also need to be considered here.

Cost of living increases have been evidenced by the rate of inflation, which is rising at a rapid pace, hitting 10.1% in September and up again in October to a 40-year high of 11.1%. Not only does this impact how your employees can spend their take home pay, but it also influences the cost of goods and services purchased by your business, lowering profit margins and increasing overall expenditure as your suppliers are forced to charge more for their services. 

The Bank of England has recently warned the UK could be set for the longest recession since records began, which is more bad news for individuals and businesses as we enter the new year. That’s why, along with the measures announced in today’s statement, support packages have also been announced which the Treasury hopes will provide some light relief to businesses and their employees in the wake of today’s budget.

Additional support for pensioners, individuals on low incomes and individuals on disability benefits will get additional help with cost-of-living payments. These will be means tested and are available in response to the increase in the cost of energy and food in the UK. Other benefits will rise in line with September’s inflation figure of 10.1%, increasing the average universal credit payment by around £600 per year.

State pensions will also rise in line with the 10.1% inflation figure. The Chancellor has also announced the government will continue to commit to their ‘triple lock’ state pension plan. This is a pledge which ensures each year, state pensions will rise in line with either; the previous September inflation figure, the average wage increase or 2.5%.

A £13.6bn support package has been announced for payers of business rates in England. The business rates ‘multiplier’ will be frozen next year. In addition to this, relief for the retail, hospitality and leisure sectors will be increased from 50% to 70% next year.

Full details of the 2022 Autumn Statement, including a full breakdown of the latest announcements have been published on the Gov.uk website. Click here to find out more.