It’s been a busy week for politics and an even busier week for commentary on politics. With so much to digest from Chancellor Rachel Reeves’ Autumn Budget last Wednesday, we’re sure as a business owner you’re wondering, what does all this mean for me?
As you’d expect, the initial response has been a mixed bag and varies from large and small businesses, sector to sector. Retail and hospitality sectors have expressed concerns over the rise in costs associated with an increased National Living Wage and employers’ National Insurance contributions, with industry leaders warning that these changes may necessitate price hikes and could hinder investment and expansion plans.
SME’s are similarly concerned about the immediate financial pressures. However, the doubling of the Employment Allowance to £10,500, as well as some other allowances and threshold changes offer some relief by offsetting the rise in National Insurance contributions.
Let’s take a look at ten key changes announced in the Autumn Budget 2024 that are likely to effect the majority of businesses:
1. Increase in Employers’ National Insurance Contributions (NICs)
Announcement: From April 2025, employers’ NICs will rise by 1.2 percentage points to 15%.
Impact: Employers will face higher payroll taxes per employee.
Financial Implication: For an employee earning £30,000 annually, the additional cost to the employer will be approximately £360 per year.
2. Doubling of Employment Allowance
Announcement: The Employment Allowance will increase from £5,000 to £10,500.
Impact: Many small businesses will be exempt from paying employer NICs.
Financial Implication: Eligible businesses can save up to an additional £5,500 annually.
3. National Living Wage Increase
Announcement: Effective April 2025, the National Living Wage for individuals over 21 will increase by 6.7% to £12.21 per hour.
Impact: Increased wage expenses for businesses employing minimum wage workers.
Financial Implication: For a full-time employee (40 hours/week), this equates to an annual increase of approximately £1,500 in wages.
4. Capital Gains Tax (CGT) Rate Increase
Announcement: The lower CGT rate will rise from 10% to 18%, and the higher rate from 20% to 24%.
Impact: Higher taxes on profits from the sale of business assets.
Financial Implication: Selling a business asset with a £50,000 gain could result in an additional £4,000 in tax.
5. Business Rates Relief for Retail, Hospitality, and Leisure Sectors
Announcement: A 40% relief on business rates, capped at £110,000 per business.
Impact: Reduced property tax burden for eligible businesses.
Financial Implication: A business with annual rates of £50,000 could save £20,000.
6. Stamp Duty Land Tax (SDLT) Increase for Second Properties
Announcement: From April 2025, an additional 2% SDLT will apply to second property purchases.
Impact: Higher acquisition costs for businesses investing in additional properties.
Financial Implication: Purchasing a £300,000 property will incur an extra £6,000 in SDLT.
7. Inclusion of Pension Pots in Inheritance Tax (IHT)
Announcement: From April 2027, unspent defined contribution pension pots will be included in the deceased’s estate for IHT purposes.
Impact: Potential IHT liabilities on remaining pension funds.
Financial Implication: An unspent pension pot of £200,000 could face a £70,000 IHT charge.
8. Extension of IHT Threshold Freeze
Announcement: The IHT threshold freeze is extended until 2030.
Impact: More estates may become liable for IHT due to asset value inflation.
Financial Implication: Estates exceeding £325,000 will continue to incur a 40% tax on the excess.
9. Simplification of Tax Reporting for the Self-Employed
Announcement: From April 2024, the cash basis will become the standard accounting method for the self-employed.
Impact: Simplified tax reporting, aligning tax payments with cash flow.
Financial Implication: Potential reduction in accounting costs and administrative burden.
10. Fuel Duty Freeze
Announcement: The existing freeze on fuel duty will continue for the 15th year.
Impact: Stable fuel costs for businesses reliant on transportation.
Financial Implication: No additional fuel tax expenses; maintaining current operating costs.
Autumn Budget 2024 In Summary
These measures, according to the government, reflect efforts to balance fiscal responsibility with support for businesses and workers. Small business owners and the self-employed should assess how these changes affect their operations and plan accordingly.
Looking to understand more about how the legislative changes outlined in the Autumn Budget 2024 might affect your business? If you’re an existing client, please feel free to arrange a meeting with your account managers to discuss. If you’re not currently a client and you’d like to speak to us about a free, no-obligation financial health check, you can book an appointment here.
