Did the Autumn Statement help entrepreneurs?

Tax partner Paul Townson takes a close look at what the tax changes could mean for your business.

The clear message from the Chancellor’s speech and the series of announcements in his Autumn Statement was his aim to ‘encourage growth’ and ‘reward hard work’. So let’s examine whether the tax cuts and changes to tax incentives will really achieve these objectives for entrepreneurial businesses.

Business investment

The big announcement for entrepreneurs investing significantly in capital expenditure is that “full expensing” was made permanent - whereby 100% of the cost of a qualifying asset (or 50% for special rate assets) can be claimed in the year of acquisition. 

However, where businesses are investing £1m or less in qualifying plant and machinery, this won’t have much of an impact given the Annual Investment Allowance (AIA) of £1m is still available and is less detrimental to the company’s tax position if the assets are later sold. 

And full expensing is not as simple as the name implies. The usual rules for First Year Allowances apply: the asset needs to be acquired new and unused, must not be leased out (unless it meets the definition of “background plant and machinery”) and the legal title of the asset needs to transfer to the company in the same accounting period (i.e. where deposits are placed but the asset is not legally acquired until the following accounting period full expensing will not be available).

While we have more certainty over the long-term outlook for capital allowances, if you are planning large capital expenditure, the key to obtaining the most beneficial capital allowances will be to understand the devil in the detail so talk to capital allowances specialists before you spend.

Tax incentives have been used over the years to encourage investment in and development of certain parts of the country, creating great opportunities for businesses looking relocate or expand. The current schemes in operation are Freeports and Investment Zones.

The first Freeports opened in December 2022 and there are now eight found across the UK. The Chancellor announced an extension to the Freeport programme from five to ten years enhancing the benefits for those areas and businesses that invest therein. Read more about Freeports

Investment Zones were first announced in the last Spring Budget and businesses investing therein should receive a very substantial employers NIC savings on their staff costs and SDLT exemption for acquiring their site. The Chancellor announced the location of zones in Greater Manchester, The West Midlands, The East Midlands, the Cardiff/Newport area, the Wrexham/Flintshire area and the Northeast/Tees Valley, meaning 6 of the 13 zones have now been identified. The programme and tax advantages were also extended from the initial five years to ten to make investment more attractive.

R&D has historically been a hugely popular relief for many entrepreneurial businesses helping to fund innovation and boost employment. 

The Chancellor confirmed the latest in a long line of reforms to R&D relief in recent years will be the merging of the current RDEC and SME schemes. This will effectively abolish the existing and more generous SME scheme, but its value had already been reduced from 1 April 2023 when the SME additional deduction was reduced from 130% to 86% (giving an effective rate of relief of 21.5p per £1 of qualifying spend for profit making SMEs, vs 24.7p previously). This next step from 1 April 2024 takes profit making SMEs from 21.5p to 15p for every £1 of qualifying spend (16.2p for loss-making entities and those small enough only to pay corporation tax at only 19%). 

Aside from the further reduction in tax relief, the main change is for subcontracted R&D. The draft legislation in this here leaves many questions unanswered but you can read the latest detailed analysis from my R&D colleagues here. 

There was better news for loss-making SMEs that are “R&D intensive” (from 1 April 2024 meaning an SME with 30% or more of its expenditure being R&D qualifying). This will remain a separate stand-alone scheme and companies will be able to claim a tax credit of 14.5% as a repayable credit (giving a potential benefit of 26.97p for every £1 of qualifying spend).

The commitment to support the creative industries continued with an announcement to broaden the benefit of the previously announced Audio-Visual Expenditure Credit. There will be a call for evidence on recent trends in that industry from which Government will base their improvements. 

The Chancellor is looking at the very substantial investment capabilities of pension funds to help drive economic growth across Britain. Amongst the measures announced are the creation of new funds that, with Government and pension scheme backing, create new opportunities for business to find investment.


Also announced was direct Government funding through both an extension of existing programmes and new schemes. In particular, £4.5 billion is to be made available to British manufacturing in eight specific sectors from 2025.


EIS and VCT investment have been important tax reliefs for start-up companies seeking investment for many years. These schemes were due to come to an end in 2025, but the chancellor has announced their extension until 2035.

Tarriff suspensions are a tool used by government for making British business more competitive, by essentially making it cheaper to import certain critical goods. Currently over 2,000 goods are on the tariff-free list. By design, tariff suspensions are temporary in nature, and the chancellor announced an extension of the scheme for five years.

Your Team

The Chancellor announced that the National Living Wage (“NLW”) will rise to £11.44 per hour (currently £10.42) from 1 April 2024 and will now apply for employees who are 21 or over (currently 23 or over). If we look back to just five years prior, at 1 April 2019 this was £8.21 for age 25 and over which shows the cost to the employer has risen significantly over this time.

Entrepreneurs in industries that traditionally have low paid workers may be concerned about the NLW increase as this could significantly increase overheads (not just the pay itself, but the employers’ National Insurance Contributions which will remain at 13.8%). Recognising this cost may have influenced the Chancellor’s decision to extend the 75% Business Rates subsidy for retail and hospitality businesses. Nonetheless, businesses will need to fund the increase, and many will have to pass this on through higher prices - prolonging inflationary pressures. 

The announcement that grabbed the headlines was the 2% cut to class 1 NIC for employees, from 12% down to 10% on employment income between £12,584 and £50,284 per annum which equates to a saving of £63 per month to an employee earning at the top of the band or more. Employers will welcomed this as their employees are receiving an increase in net pay that they do not need to be fund. 

Cutting NIC is cheaper and more targeted than cutting income tax and can be defended politically as ‘incentivising employment’ – the carrot part of carrot and stick ‘back to work’ proposals in the Autumn Statement. Of course, this did little to redress the balance against the ongoing “stealth tax” rises resulting from the freeze in income tax and NIC thresholds – which gradually push taxpayers into higher tax brackets as their wages increase with inflation. This ‘fiscal drag’ is feeding through to impact businesses – either through higher wage demands or because of the significant disincentive to strive for promotion and/or work overtime it creates for individuals at key thresholds (for example at £50,000 and £100,000). 

The Chancellor also announced investment in high level apprenticeships for specific growth sectors, clarification of the tax reliefs available for training costs for the self-employed and a one-year extension to employers’ NIC relief for those recruiting a veteran.

The chancellor also announced measures through which HMRC will collect additional data on behalf of Government. An initial requirement will be for employers to disclose additional information about their staff under RTI payroll returns, including hours worked during the pay period from April 2025 onwards: this means incurring costs in updating systems and procedure to collect the necessary data. 

Additional measures will affect how the business owners complete their tax returns. For example, it is proposed that dividends from companies a person owns are disclosed separately from other dividends.

Your profits

Traditionally, the overall tax cost for a business owner to withdraw profits from a company has favoured taking dividends over salary but, over recent years, changes to the dividend tax rate have narrowed the tax differential. From 1 April 2023, with the standard rate of corporation tax increasing to 25%, for many business owners extracting their profits as remuneration carried a lower combined tax cost – for instance for those over state retirement age. For owners who only pay tax at basic and higher rates, the 2% reduction in NIC means it is now even cheaper to extract profits through salary.

That said, there remain still many circumstances where the scales may still fall toward dividend (for example, the dividend tax rate for basic rate taxpayers is quite low), so you should always discus the most tax-efficient way to take you profits with your accountant or tax adviser. 

Accounting on the cash basis means recognising income when it is received and costs when paid rather than when they are accrued (ie over the life of a contract). Currently, the cash accounting basis is the default method for calculating taxable profits for sole-traders and trading general and limited partnerships (without corporate partners) with turnover of less than £150,000. If disapplied the accruals basis will then apply. The chancellor has announced the removal of the £150,000 cap, making it the default basis for all such taxpayers – but not LLPs or investment partnerships.

This is just about the timing of when profits are taxed but cash accounting will push some profits into the following tax year and so might be preferred by those who traditionally have working capital tied up for long periods, for example as stock, work in progress or debtors. It will also make the new quarterly tax returns easier when the self-employed are moved to HMRC’s “Making Tax Digital” regime in 2026. 

Where now?

While the longer-term announcements were broadly supportive of entrepreneurs who can and are prepared to invest in their businesses, much of the Autumn Statement was focused on the Chancellor’s political agenda. We may see more of that in the Spring Budget when the much-discussed reform to inheritance tax may materialise.

BDO has a specialist tax team, solely focused on supporting and advising fast growing, ambitious entrepreneurial businesses. Talk to us by completing our enquiryenquiry form or contact the author, Paul Townson directly and he will direct you to your local adviser.

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