Welcome to the Autumn Budget 2024, where we’ll be keeping you up to date on the announcements affecting small businesses.
Chancellor Rachel Reeves has unveiled her first Budget. Below, you’ll find the highlights along with some expert commentary as to how these measures will change things for smaller businesses.
Autumn Budget 2024 and how it affects small businesses
National Minimum Wage increase
Before the Budget, Labour confirmed that the National Minimum Wage would be increasing to £12.21 (a 6.7 per cent increase) for adults over 21 from April 2025. For 18-20-year-olds, the minimum wage will go from £8.60 to £10. Meanwhile, apprentice wages will rise from £6.40 to £7.55 per hour.
Suzanne Brooker, restructuring, reorganisation and insolvency partner at Spencer West LLP, said: “The confirmation to raise the minimum wage and to increase the employers’ NIC will place a further financial burden on UK business against a backdrop of increasing costs of borrowing (due the interest rate rises already in play) and inflationary rises in supply chains already in place.
“These additional employment liabilities will undoubtedly result in operational reductions to right size financial performance or a further increase in the costs of products or services as costs are passed on which in turn affects growth plans.”
Increase in employers’ National Insurance
As expected, National Insurance for workers hasn’t increased, but it has for employers. Employers’ NI will be increasing by 1.2 per cent to 15 per cent from April 2025.
Nimesh Shah, CEO at Blick Rothenburg, said: “The increase to employers National Insurance by 1.2 per cent and lowering the threshold to £5,000 is huge, and generates well over half of the £40 billion of tax increases.”
Employment Allowance raise
The Employment Allowance will increase from £5,000 to £10,500. According to Reeves, this means that 865,000 employers won’t pay any National Insurance at all next year.
Business rates
We’re finally seeing some reform on business rates, at least for retail, hospitality and leisure businesses. From 2026/27, two new lower business rates will be introduced for these industries.
The current 75 per cent relief, due to expire in 2025, will be replaced by a 40 per cent relief on business rates for 24/25, up to a maximum discount of £110,000. The small business tax multiplier will be frozen next year too.
Asif Alidina, co-founder and CEO of Inntelo AI, said: “This was a disappointing Budget for the hospitality sector. After years of hardship, this was not the time to reduce critical support, leaving businesses grappling with higher staffing costs while faced with higher business rates. While the sector’s call for an extension to that relief were addressed, the lower rate of relief will place an additional burden on an industry already under strain.”
Capital Gains Tax increase
Rates of Capital Gains Tax are indeed going up, as predicted. The lower rate of CGT will increase from 10 per cent to 18 per cent and the higher rate from 20 per cent to 24 per cent.
Tom Golding, corporate tax partner at PKF Littlejohn, commented: “Speculation is finally over, the lower rate of CGT will increase to 18 per cent and higher rate to 24 per cent. There will no doubt be relief that the reports of an increase to as high as 39 per cent have not come to fruition. Will this change really have the impact that the Chancellor is anticipating having seen a flurry of activity pre-Budget Day?”
Inheritance Tax (IHT)
Agricultural Property Relief and Business Property Relief will see reform. From April 2026, the first £1 million of combined business and agricultural assets won’t be subject to IHT. For assets over £1m, there will be 50 per cent relief, at an effective rate of 20 per cent.
Nimesh Shah, CEO at Blick Rothenburg, said: “Capping Business Property Relief at £1m and offering a discount of 50 per cent on the remainder is a blow to family businesses.”
“If I heard correctly, there’s no overnight change to Capital Gains Tax, and this will take effect from April 6, 2025. Whilst it’s only a slight 4 per cent increase to CGT, I expect there will be a rush of transactions before the end of the tax year. This will give a big enough boost to CGT receipts.”
Business Asset Disposal Relief
After worries about it being scrapped altogether, the lifetime limit for Business Asset Disposal Relief will remain at £1 million.
Fuel Duty and Alcohol Duty
Fuel Duty will be frozen next year and the 5p discount maintained.
Duty is being cut on draft alcohol while duty on non-draught beverages will rise in line with RPI from February next year.
Corporate Tax Roadmap
The government has set out a Corporate Tax Roadmap outlining plans for Corporation Tax over the coming years. The highlights include:
- Capping the headline rate of Corporation Tax at 25 per cent for the duration of parliament, the lowest rate in the G7
- Retaining the small profits rate and marginal relief at current rates and thresholds
- Maintaining our world leading capital allowances system, including permanent full expensing and the £1 million annual investment allowance
- Maintaining the generosity of R&D reliefs
- Working collaboratively with companies on simplification and improving user experience, including HMRC’s path forward on digitisation
- Developing a new process for increasing the tax certainty available in advance for major investments
Jason Piper, head of tax and business law at ACCA, said: “The announcement of a Corporation Taxes Roadmap is a step in the right direction, with confirmation of stability around many central features.
“Sophisticated investors will always look at more than the headline rate, and simplification and reform of the way taxable profits are calculated would reduce the administrative burden for smaller businesses and increase certainty for larger ones.”
Overall comments
Nikki Lidster, head of SME at Zurich Insurance, has concerns around how SMEs are going to manage extra costs. “An increase in National Insurance (NI) contributions for employers to 15 per cent in April 2025, alongside the increase in the National Living Wage to £12.21 per hour and the reduction in the allowance to £5000, despite the reform to the employment allowance, will hit small and medium-sized enterprises (SMEs) hard at a time when many are already struggling to make ends meet.
“While the increase in NI will raise significant revenue, the lack of time to prepare will mean many small businesses could struggle to forecast the impact of the increase on their longer-term financial planning. An increase such as this could mean SMEs won’t be able to invest in business development, new and existing talent or fulfil expansion plans in the future.”
Kevin Fitzgerald, UK MD of Employment Hero, feels that it was a bad Budget for small businesses – as well as their staff. “The UK’s 5.5 million small businesses are the losers in this budget, as they will be the ones forced to fund the minimum wage rise and the National Insurance increase. While it will be easier for larger organisations to respond and grow, a business with a dozen employees looking to expand is being all but commanded to stop hiring.
“It is well known that the ‘job taxes’ like the change to National Insurance end up largely passed onto workers, so this pain will ultimately be passed onto employees. Workers will undoubtedly be asked to do more as employers cannot afford to hire the help they need, leading to poorer productivity and a rise in stress and burnout.”
Neil Rudge, Chief Banking Officer (Commercial) at Shawbrook, has mixed feelings: “Having navigated the pandemic and the cost-of-living crisis, SMEs are now facing into the decision to increase the NI rate for employers with rising costs already a key concern for the majority of SME owners and management teams (72 per cent).
“Business owners however will be reassured by the Government’s commitment to growth, and with numerous infrastructure projects announced, businesses within these sectors and regions could see benefits in the future.
“For businesses thinking about their own budgets, and growth plans for the years ahead, understanding the right finance options will be key. Whether they need to prioritise managing their cash-flow or are gearing up to a big event in the coming years, speaking to a professional early will ensure they are making the most of the options available.”
Charles Precious, principal, client services leader at Ryan:
“Businesses have craved stability for a long time, and while they might not be thrilled with all of the changes announced today, they can at least now start planning properly for the long term – rather than from budget to budget. This includes the guarantee from the government that Corporation Tax will be capped at 25 per cent. We welcome the government’s rollout of a full, corporate tax roadmap so that businesses can finally have a clear sense of direction on where UK business taxes are heading.”
Autumn Budget 2024 live blog
13:26: Providing additional funding to tackle shoplifting gangs who target retailers, as well as police and retailer training, and removing immunity for low-value shoplifting.
13:15 Corporate Tax Roadmap. Cap Corporation Tax at 25 per cent. Will maintain full expensing and R&D relief.
13:14: From 2026/27 – introduce two permanently lower business rates for retail, leisure and hospitality. The current 75 per cent relief, due to expire in 2025, will be replaced by a 40 per cent relief on business rates for 24/25, up to a maximum discount of £110,000. Small business tax multiplier frozen from next year.
Alcohol Duty will go up for drinks not on draft in line with the retail price index (RPI). Draft beverages duty will cut. A ‘Penny off a pint in the pub’, as Reeves says.
Company car tax incentives for electric vehicles will be maintained.
13:11: AIM (and other similar) market shares will get 50 per cent IHT relief.
13:11: Reform Agricultural Property Relief and Business Property Relief. From April 2026, the first £1 million of combined business and agricultural assets won’t be subject to IHT. For assets over £1m, there will be 50 per cent relief, at an effective rate of 20 per cent.
13:09: IHT thresholds will be frozen until 2030.
13:09: EIS and SEIS extended.
13:08: The lifetime cap of Business Asset Disposal Relief will remain at £1 million.
13:07: Capital Gain Tax – the lower rate will increase from 10 per cent to 18 per cent and the higher rate from 20 per cent to 24 per cent.
13:06: Increasing employment allowance from £5,000 to £10,500.
13:04: Increase in employers’ NI by 1.2 per cent to 15 per cent from April 2025. The threshold at which businesses will start paying NI on employees earnings will also be reduced from £9,100 to £5,000.
13:02: Fuel Duty frozen for another year.
13:00: Increased protection for workers from unfair dismissal, plus improved parental rights.
12:57: National Living Wage confirmed to increase 6.7 per cent from April 2025 for adults over 21. 18-20-year-olds will be entitled to £10 an hour.
12:56: Government will modernise HMRC systems and clamp down on umbrella companies.
12:50: Providing opportunities for SMEs as well as measures affecting R&D.
12:49: Creating Skills England.
12:48: OBR will publish growth forecast for 10 years. CPI inflation will average 2.5 per cent this year, 2.6 per cent in 2025, then 2.3 per cent in 2026, 2.1 per cent in 2027, 2.1 per cent in 2028 and 2 cent in 2029. Real GDP growth will be 1.1 per cent in 2024, 2 per cent in 2025, 1.8 per cent in 2026, 1.5 per cent in 2027, 1.5 per cent in 2028, and 1.6 per cent in 2029.
12:46: Government will maintain inflation target of 2 per cent.
12:36: Reeves says the only way to growth is ‘invest, invest, invest’.
Read more on Autumn Budget 2024
Autumn Budget 2024 – what’s in it for small businesses? – Ahead of the Autumn Budget 2024, we take a look at the announcements that Chancellor Rachel Reeves might make that affect small businesses
