Will the Autumn Statement help small businesses through recession?

Jeremy Hunt today announced a huge support package for small businesses worth nearly £14bn in a bid to shield them from inflation.

Rising costs coupled with reduced consumer demand have brought small businesses to their knees this year as they try to recover from the pandemic.

While there were no nasty surprises in today’s fall statement, small businesses have dismissed today’s announcements as a “missed opportunity.”

We look at what the statement means for businesses and what more needs to be done to support entrepreneurs.

Will business rates go up?

Corporate rates were a major concern for small businesses as support was set to end in April. However, Hunt has today announced a nearly £14bn support package, including an extension of business rates.

The exemption, which was due to end in April, has been extended and increased from 50 per cent to 75 per cent to £110,000 per company.

The business rate multiplier will be frozen for another year, meaning business taxpayers will save £9.3 billion over the next five years.

The plans keep the small business and standard multiplier at 49.9p and 51.2p, respectively, instead of rising to 52.9p and 54.2p.

Hunt said: ‘Nearly two-thirds of properties will not pay a cent next year, and thousands of pubs, restaurants and small shops will benefit.’

The Treasury claims the overall increase in business rate bills will be less than one percent, compared to more than 20 percent without the Department’s intervention.

UK Hospitality boss Kate Nicholls said: ‘I am pleased that the Chancellor has listened to the vast majority of UK Hospitality’s proposals on business rates, including a multiplier freeze, extended waivers and no downward transition.

“This means those who see their valuations fall will see the benefit immediately in their accounts, while the gains are capped.”

But the announcements may not go far enough for many struggling small businesses. Nicholls has called for a thorough overhaul of the current system which is “outdated and not fit for purpose”.

Chris Baguley, from SME lender Together added: ‘Today’s announcements still amount to a Band-Aid solution. The promise of a £13.6 billion package of business tariff support just isn’t enough for the struggling small and medium-sized businesses across the country who had hoped for more substantial cost relief.

“Today was another huge missed opportunity for the government to really show how they want to support British businesses and entrepreneurs.”

High Street businesses may also have something to say about the news that the Treasury has halted work on the online sales tax, which was designed to fund a cut in business rates for physical stores.

Should small businesses pay more tax?

While there may have been a collective sigh of relief following the business rate extension, many small business owners will worry about the impact of higher taxes.

Tax increases and threshold shifts or freezes were the order of the day, with a significant reduction in the tax-free reimbursement of dividends.

The £2,000 grant will now fall to £1,000 in April 2023 and £500 in the following year. This means that directors who pay themselves largely or partly in dividends will have to deal with higher tax returns.

Martin McTague, national president of the Federation of Small Businesses (FSB) said: “The dividend tax cut will be a bitter blow to hard-working small joint stock owners who are trying to pay the bills, make a living and run their businesses. to grow. .

“This is a group that was excluded from direct support during the darkest days of Covid, then pushed out of National Insurance cuts more recently.”

A business executive who earns £40,000 a year will be more than £500 worse off than an employee who earns £40,000 and pays income tax and social insurance, according to the FSB.

Freezing the employer insurance threshold alongside an increase in the living wage will also raise the cost of employment, even using corporate rates.

Similarly, a VAT threshold freeze will still drive costs up amid higher inflation, and McTague warns it could “drag more struggling small businesses into the tax’s reach while keeping others from growing.”

Rich Wagner, chief executive of Cashplus Bank said: “Many of our clients run healthy businesses that are being pushed into the red by rising costs and will welcome the announced corporate rate relief, but all will be well aware of the wider impact of higher personal taxes and the need for their customers to save.

For Kate Allen, owner of luxury holiday rental specialist Salcombe Finest, the Autumn Statement did not provide any incentive for small businesses.

‘Jeremy Hunt is a modern Fagin to the working people of this country. The complete failure to deliver growth and boost small businesses that are the vital backbone of our economy has left me demotivated and depressed.

“What’s the point of working hard if we’re punished with a freeze on income and tax thresholds and a cut in tax-free dividends?”

Will the energy continue to rise?

Better news came for small businesses struggling with energy bills as Hunt extended the energy price guarantee beyond April for the most vulnerable sectors.

“The cabinet recognizes that some companies, such as companies that are highly exposed to energy prices and cannot sufficiently pass on or absorb these costs, may continue to need support after March 2023.”

The FSB welcomed the aid package, but said that “continued aid should not be viewed through the narrow lens of specific sectors, but rather on the basis of a company’s size.”

A review of continued support for businesses will be announced by December 31.