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For small businesses, there are several key areas to look out for following this Autumn Statement.

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, 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 on a voluntary basis, as illustrated by the table below.

Employers  

On 6 January 2024 the primary class 1 NIC rate for employees changes from 12% to 10% on earnings between £12,570 and £50,270 per year. Update your payroll software before you run your January payroll, and check it is deducting the correct rate of class 1 NIC from employees.  

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. 

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. 

Note 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%.

Company cars 

For some years, it has been tax efficient to purchase new electric cars within a company. 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 7% for 2027/28.  Businesses may need to review how the electric cars are held.  

Profit extraction 

Where the company pays dividends to 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. 

Capital gains tax 

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.   

As always if you need help interpreting how these changes will affect your business get in touch with your accountant or tax adviser.

Noel Guilford