The changes to National Insurance contributions (NICs) announced by Chancellor Jeremy Hunt in the Autumn Statement will help to ‘ease the burden on strivers up and down the country‘, according to the Federation of Small Businesses (FSB).

Mr Hunt used his Autumn Statement speech to cut the main rate of employee NICs from 12% to 10% for 27 million workers across the UK. This is set to take effect from 6 January 2024. The Chancellor said that, for the average employee earning £35,400 per year, the change amounts to a £450 annual tax cut. 

For the self-employed, the Chancellor also abolished Class 2 NICs and cut Class 4 NICs from 9% to 8%, effective from 6 April 2024.

Tina McKenzie, Policy Chair at the FSB, said:

‘The Chancellor’s decision to reduce the rate of self-employed NICs and abolish the Class 2 element is extremely welcome, easing the burden on strivers up and down the country.

‘The FSB has long campaigned for the abolition of the Class 2 element of NICs and the reduction of Class 4, and we are therefore pleased that the Chancellor has acted.’

Internet link: GOV.UK FSB website

UK inflation fell to a two-year low while the base rate of interest was unchanged by the Bank of England for the second month in a row.

The Office for National Statistics (ONS) found that the UK’s rate of Consumer Price Index inflation fell to 4.6% from 6.7% in September.

The ONS found that a small reduction in the energy price cap helped to bring the inflation rate down. According to the data, electricity costs are down 15.6% compared to a year earlier, whilst gas costs are down by 31%.

Meanwhile, the Monetary Policy Committee (MPC) held the base interest rate at 5.25%.

The latest decision marks the second time in a row that interest rates have been held at 5.25% – their highest level in 15 years.

David Bharier, Head of Research at the British Chambers of Commerce (BCC), said:

‘The decision to again hold the interest rate at 5.25% will allay some concerns of the businesses we speak to that are unable to stomach further rises.

‘Our research has shown that interest rates have grown as a key issue among companies. This is especially true for smaller firms and those in consumer facing sectors who have seen rising borrowing costs and decreased customer demand.’

Internet link: ONS website Bank of England website BCC website

Chancellor Jeremy Hunt used his Autumn Statement to make Full Expensing permanent for those businesses investing in IT equipment, plant and machinery.

The Chancellor said he was aiming to stimulate economic growth and highlighted 110 measures for businesses in the Statement.

Full Expensing was first announced in the March Budget and was scheduled to last for three years. The rules allow a 100% write-off on qualifying expenditure on most plant and machinery (excluding cars) as long as it is unused and not second-hand.

Mr Hunt has now made it permanent and said it represents the ‘largest business tax cut in modern British history‘, worth £11 billion per annum.

The Chancellor also extended the tax reliefs and incentives for Freeports and the Investment Zones programme from five to ten years. In addition, he announced three advanced manufacturing Investment Zones, which will be established in Greater Manchester, the East Midlands and the West Midlands.

There is also a business rates support package worth £4.3 billion over the next five years to help high streets and protect small businesses. This includes a rollover of the 75% retail, hospitality and leisure relief.

Rain Newton-Smith, Chief Executive of the Confederation of British Industry (CBI), said:

‘Making full capital expensing a permanent feature of the tax system can be transformational for accelerating growth and improving living standards in the long-term. Helping firms to unleash pent-up investment is critical to getting momentum into the economy.’

Internet link: GOV.UK CBI website

Many UK firms are still facing hiring issues as a result of challenging economic conditions, according to a report from the British Chambers of Commerce (BCC).

73% of firms surveyed by the BCC reported having recruitment problems, with businesses in the hospitality sector the most likely to report challenges.

The construction and manufacturing industries are also experiencing issues, and 72% of retail businesses said they have had recruitment problems.

Adverse economic conditions are restricting investment in workplace training, the BCC found.

Jane Gratton, Deputy Director of Public Policy at the BCC, said:

‘The scale of the recruitment crisis remains huge, despite a welcome fall in the number of firms reporting hiring problems.

‘We have just under a million job vacancies in the economy, and skills shortages are damaging businesses’ ability to operate profitably – as well as impacting the wellbeing and morale of remaining staff.

‘Businesses and the government need to work together to resolve this problem. Bringing more people back into the workforce, with rapid retraining programmes and comprehensive support, will help. While many employers remain sharply focused on investment in training, most businesses need more help to get the workforce skills they need.’

Internet link: BCC website