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small business owner | accountingweb | Autumn Statement: Seven SME Planning Points
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SMEs have seven key tax planning points to watch

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In the Autumn Statement there were seven key planning areas for small and medium enterprises to be aware of.

23rd Nov 2023
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For small businesses, companies and employers there are seven key planning areas to watch out for following this Autumn Statement.

1. Wages and salaries 

Employers with younger workers on the payroll need to pay close attention to their ages, as the age requirements for the different statutory wage rates are changing for pay periods beginning on or after 1 April 2024. The new national minimum wage (NMW) rates are shown in the table below.  

Hourly rate from  Living wage 

(Age 21 +)

Adult Age 18 to 20   16 and 17 year olds Apprentice rate Accommodation daily off-set
1 April 2024 £11.44 N/A £8.60 £6.40 £6.40 £9.99
1 April 2023 £10.42 £10.18 £7.49 £5.28 £5.28 £9.10
From April 2024 all employees aged 21 and over will be entitled to the “living wage” – in other words the highest statutory rate, which was previously only paid to those aged 23 and over. Those lucky 21 and 22 year olds get a 12.37% pay rise of £1.26 per hour. As an employer, you need to budget for this extra cost.

Some employers try to underpay their workers by pretending the individual is employed as an apprentice, but that lower apprentice rate can only be paid in the first year of an apprenticeship or if the employee is aged under 19. The NMW apprenticeship rate has also increased by 21.2%.

2. Employer national insurance traps 

If you hire an armed forces veteran in their first year of civilian employment, you can benefit from a zero rate of secondary class 1 national insurance contribution (NIC) on the employee’s pay up to veterans upper secondary threshold (VUST). The VUST has been frozen at £50,270 per year since it was introduced in April 2021. 

This employer’s class 1 NIC relief will now be extended to 5 April 2025. But it only applies for the first year of civilian employment for each veteran, so you need to keep a close eye on the anniversary of when the veteran started civilian employment, which may not be the same as the start date with your company.  

Another date to fix on your notice board is 6 January 2024. This is when the primary class 1 NIC rate for your employees changes from 12% to 10% on earnings between £12,570 and £50,270 per year. You will need to update your payroll software before you run your January payroll, and check it is deducting the correct rate of class 1 NIC from employees.  

3. Self-employed

The self-employed normally get ignored in Budget statements, but this year there were three reasons to be cheerful.

First, the cash basis will be the default option in drawing up accounts for any size of unincorporated business from the tax year 2024/25. This simplifies accounting as you don’t have to take into account accruals and pre-payments. The restrictions around deducting interest and loss relief will also be removed.  

Secondly the main rate of class 4 NIC you pay will be cut from 9% to 8% on profits up to £50,270 per year, also from the 2024/25 tax year. Profits above this threshold will continue to attract class 4 NIC at 2%.  

Finally, the Chancellor said class 2 NIC is to be abolished from 6 April 2024, but the NI credits to build up entitlements to benefits such as the state pension will remain, as illustrated by the table below.

Annual profits To obtain NIC credit 2023/24 2024/25
    Weekly  Weekly
Below £6,725 Voluntary payment:  £3.45  £3.70
£6,726 to £12,570  Automatic credit:  0% 0%
Above £12,570  Must pay/automatic credit  £3.45 £0

4. Company cars 

For some years, it has been tax efficient to purchase new electric cars within a company to provide to the employees or directors. The company receives a 100% first-year deduction, and the employee had little or no benefit in kind. 

In the past two years the taxable benefit for a fully electric car has been only 2% of the list price, but this is due to increase to 3% in 2025/26 and will reach 5% for 2027/28.  You may need to review how the electric cars are held.  

PracticeWeb Autumn Statement 2023 Covers

5. Profit extraction 

Where the company pays dividends to minor shareholders those dividends should be paid before 6 April 2024 to take advantage of the £1,000 dividend allowance, as this allowance is cut to £500 per person from 2024/25. The rate of tax on dividends will remain at 8.75% within the basic rate band for 2024/25. 

6. Selling the business 

If you are planning to sell your business in the next year remember that the annual exemption for capital gains tax (CGT) is cut from £6,000 to £3,000 per person from 6 April 2024. 

Where the gain qualifies for business asset disposal relief up to £1m of gains per taxpayer can be charged at 10% instead of £20% CGT. Introducing a family member as a shareholder or partner well before a planned sale can help to spread the gain over two allowances.   

7. Agricultural land 

Where farmland is held by an individual or partnership, don’t assume that agricultural property relief (APR) will apply to exempt the value of that land from inheritance tax. If the land is used for conservation purposes, perhaps for rewilding or carbon storage, it may not qualify as “agricultural”, so check the details with an agricultural land specialist.

Where the farmland is located in a European Economic Area (EEA) state, the Channel Islands, or the Isle of Man it won’t qualify for APR or woodlands relief for inheritance tax purposes from 6 April 2024. 

Land and other business assets held within a company will generally qualify for business asset relief for inheritance tax, so this could be another good reason to incorporate the business.

Visit our dedicated Autumn Statement 2023 hub here to find all related articles from our experts. 

Replies (7)

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Tornado
By Tornado
23rd Nov 2023 11:23

First, the cash basis will be the default option in drawing up accounts for any size of unincorporated business from the tax year 2024/25. This simplifies accounting as you don’t have to take into account accruals and pre-payments. The restrictions around deducting interest and loss relief will also be removed.

How does this work with VAT Returns. Does this mean that two sets of records are required?

Thanks (3)
By ireallyshouldknowthisbut
23rd Nov 2023 13:58

Do we know how these "automatic credits" will work for the self employed?

ie will we still need to essentially register for Class 2 NI but at a payment rate of nil utilising the existing quite hopeless system?

Or will the data push down from the tax return, ie how any normal person would expect it to work?

if the later, that will work really well
If the former, it's going to a hundreds times worse than now as we simply won't know who is/isn't registered self employed for NI purposes if there is no trigger when HMRC pulls the class 2 out of the filed return.

Thanks (1)
Replying to ireallyshouldknowthisbut:
Head of woman
By Rebecca Cave
23rd Nov 2023 17:01

I suspect the first option - its going to be a nightmare.

Thanks (1)
avatar
By ABD
24th Nov 2023 10:21

Hi Rebecca

Where does the 7% BIK rate come from, it looks like 5% in the latest legislation?

Thanks (0)
Replying to ABD:
Head of woman
By Rebecca Cave
27th Nov 2023 07:51

When I wrote this article I took the figures from the Annex A to the Overview of Tax Legislation and rates: https://www.gov.uk/government/publications/autumn-statement-2023-overvie...
At that point the company car tax column for 2027/28 ( you need to move the slider at the bottom of the table to see it) read 7% for electric cars. That figure has now been corrected to 5%.
I do apologise for misleading you, but on the day the Govt's table was wrong, I shouldn't have trusted it.
I'll get this article corrected.

Thanks (1)
avatar
By johnthegood
01st Dec 2023 08:08

If you are self employed earning below £6725, what class of NI will you voluntarily pay if there is no longer class 2?

Thanks (0)
Replying to johnthegood:
avatar
By ABD
01st Dec 2023 09:43

They will be able to pay class 2 voluntarily, there will be no compulsary class 2

Thanks (0)