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What does the Chancellor's Autumn Statement mean for your business?

Author : Amanda Vlietstra

17 November 2022

Jeremy Hunt has confirmed that millions will be paying more tax...

The Chancellor, Jeremy Hunt, has confirmed that millions will be paying more tax in his Autumn Statement, as the OBR confirms that the UK is already in recession.

Warning that Britons must make “sacrifices” to help stabilise the economy, he has introduced £24 billion in tax rises, which includes freezing the personal allowance, basic and higher tax thresholds until 2028, freezing National Insurance, VAT and inheritance tax thresholds, and cutting the 45p top rate interest tax rate from £150,000 to £125,000. However, the bulk of the £24 billion tax rises and commensurate £30 billion in spending cuts will not be felt until after the next General Election, expected to take place in 2024. 

Hunt told Parliament that his budget was aimed at “asking more from those who have more” and stated that "[w]e will still have the most generous set of tax-free allowances of any G7 country."

Criticism 

However, his budget immediately came under criticism from the Federation of Small Businesses. Their spokesperson, Martin McTague, warned that freezing the NI threshold makes it harder for employers to hire and retain staff. “Freezing the threshold for employer National Insurance at a time of such high inflation is a stealthy hike in the jobs tax, just as recessionary pressures threaten an increase in unemployment,” he said, as reported by The Guardian. “Alongside the understandable rise in the Living Wage, this Budget will ramp up the costs of employment without offsetting that with measures to reduce other business costs.”

Describing the budget as “high on stealth-creation and low on wealth-creation”, he said: “Stealthily freezing the VAT threshold at a time of sky-high inflation will both drag more struggling small firms into scope for the tax, while disincentivising others from growing.

He added: “FSB’s research shows one-in-four (24%) of small firms and the self-employed are held back by the VAT threshold.”

Within the facilities management and commercial property sectors, there was some dissatisfaction about the Autumn Statement. Roy Shelton, CEO of the  Yorkshire-based tech firm, the Connectus Group, which delivers software to help businesses mitigate risk, said: “Jeremy Hunt had an almost impossible task today. But the tax changes he’s announced will badly impact many small, and medium size businesses. From office rent to higher-than-expected salary increases, small businesses now face rising costs across the board.  Hiking tax bills on top of the existing pressure of inflation and rising energy costs feels like a triple whammy.”

"Too much stick and not enough carrot"

He continued: “SMEs will feel the impact of these increases the most. I was disappointed the Chancellor didn’t seek to offer more reward today to businesses seeking to grow. Many companies are using technology and automation to reduce costs, freeing people to work in a more efficient way.  The UK has now firmly cemented its place as a magnet for dynamic start-ups. Many used the pandemic to pivot, adapt and come back stronger. But for this to continue, the government must support small and medium sized enterprises more. We can’t do it all on our own, and today we saw too much stick and not enough carrot from the Chancellor.”

However, he did praise Hunt’s decision to increase the National Living Wage by 9.7% from April to an hourly rate of £10.42, stating: “We have always paid all of our staff well above the national living wage, and I’d urge other employers to do so if they can.”

Lionel Benjamin, Co-Founder of AGO Hotels, told PFM that there wasn’t much in the budget to offer succour to the hospitality sector – a vertical that works hand-in-hand with facilities. He said: “The announcement two-thirds of properties will not pay a penny more in business rates next year with the promise hospitality will benefit to the tune of £14bn over five years will bring very little comfort to those who are imminently facing the possible closure of their businesses. The entire business rates system needs to evolve and a permanent re-structure is essential. 

He continued: “The already stated rise of corporation tax to 25% from April 2023 and the changes to tax-free dividend allowances are further blows to businesses. It remains to be seen what the Treasury-led review on energy will recommend. In the meantime, in just over five months, businesses no longer have the help they need for soaring energy bills.”

“Earlier this week, we heard the hospitality industry will face a £3.6bn bill next April if business rates increase in line with inflation – a £900m increase this year – creating a huge barrier for growth in the industry. Our main asks were a reduction of VAT to 12.5% and a comprehensive review and reduction of the wildly outdated system of business rates. Today’s Statement was an opportunity for the Government to show it was truly promoting business growth, but it failed to do so,” he concluded.

While it was, without doubt, a budget that contained more gloom than sunshine, it was designed to promote economic stability and restore market confidence after the unfunded tax cuts in Hunt’s predecessor Kwasi Kwarteng’s “mini-budget” sent the pound tumbling to an all-time low. At the time of writing, sterling had sputtered from $1.193 to $1.1798 against the dollar in London following Hunt’s statement in Parliament, but DoubleLine portfolio manager Bill Campbell told Reuters that the pound’s recovery over the past month meant the budget’s main announcements were probably already priced in.

It now remains to be seen whether Hunt’s budget delivers the economic stability he’s promised.


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