Chancellor Jeremy Hunt delivered a fairly bleak Autumn Statement last week, with projections that the UK economy will shrink next year after already entering a recession. He put forward a bevy of tax and spending changes to firm up the books that will have impacts on the entire economy – including small and medium businesses.
Here’s some of the biggest takeaways.
Hard times are here and not going away quickly
Budgets come with detailed projections about the state of the UK economy. These ones did not make for fun reading: They said the UK was already in a recession and forecast that the economy would shrink by 1.4% in 2023. This would send unemployment up to 4.9% in 2024 and with inflation at 9.1% this year and 7.4% next real-term living standards would fall by 7% over 2023-2024 – with costs rising faster than incomes can keep up with them.
These are of course just projections. But they are gloomy ones and will play a part in setting confidence for consumers and other businesses.
Tax changes will bite for some small business owners
The Government was looking to plug a large gap in its revenues, and have done this with a mixture of spending cuts and tax raises.
Several of the tax hikes will affect small businesses and their owners.
The VAT threshold has been frozen at £85,000 until 2026, instead of moving up in line with inflation. That means that any business with a turnover that high will need to register for VAT.
Other changes to personal tax will also effect business owners, especially ones who pay themselves dividends.
The tax-free dividend allowance has been slashed from £2000 to £1000 in 2023/24, then £500 in 2024/25. And the capital gains allowance will be cut from £12,300 to £6000 in 2023/24, then £3000 in 2024/25.
Furthermore anyone making over £125,140 a year will face more income tax too, as the 45% rate will now kick in from there, instead of £150,000.
Living wage heading up
People with employees may have to pay them more, as the national living wage is being raised to £10.42 an hour – and a “substantial” boost to the minimum wage is planned for April 2023.
While this may hurt in the first instance, people on very low wages tend to spend a lot of their incomes – so boosts will likely be seen in wider consumer spending too.
Good knowledge of your business will be key
Weathering this kind of storm is tricky but far from impossible. Indeed a lot of businesses come out of downturns with a better sense of their business’s strengths and a good way to exploit them. Good research on what is working and not working – both for you and your competitors – will be crucial, and with Shepper, it doesn’t have to cost an arm and a leg. Get in touch today.
