Autumn Budget 2024 impact for small businesses
Posted on 31st October 2024
This year’s Autumn Budget is largely as expected following extensive advance briefings and ‘leaks’. Overall, the government aims to raise an additional £40billion, but what does this mean for small businesses?
Overview of changes in the Autumn Budget 2024
An increase in employers’ National Insurance Contributions from 13.8% to 15% from 6 April 2025.
Inheritance tax equivalent to 20% will apply from April 2026 to business and agricultural assets over £1million.
A 6.7% rise in the National Minimum Wage rate to £12.21 per hour for 21 year-olds from April 2025. For employees aged 18 to 20 the minimum wage will rise by 16.3% from £8.60 to £10 per hour.
Permanently lower business rates for retail, hospitality and leisure businesses from 2026/27.
Business spending
National Insurance. The per-employee earning threshold when employers start paying National Insurance contributions (NICs) changes from £9,100 to £5,000. The move is expected to raise an additional £25billion in taxes. Further increases to employers’ NICs could lead to less business investment in other areas. They could affect recruitment and future pay increases or lead to redundancies. Alternatively, prices might increase, adding to inflation.
National Living Wage. Many people receiving the National Living Wage work in sectors with very low margins. They include hard-pressed areas such as retail, leisure, hospitality, cleaning and maintenance. Increases in the basic rate of pay will affect all employees.
Business Rates. For the time being retail, hospitality and leisure businesses will continue to receive 40% relief on business rates up to a cap of £110,000.
Employment Allowance. The Employment Allowance applies to the National Insurance liability for eligible employers. It is supposed to support smaller employers with their employment costs. It applies to companies that have at least one employee or non-director earning above the secondary threshold for Class 1 NICs. The Allowance will increase from £5,000 to £10,500 and the £100,000 threshold will no longer apply. This will probably only affect to around 15% of small employers.
Fuel Duty. Fuel duty will not increase, so the previous government’s 5p cut from March 2022 remains.
Annual Investment Allowance. Permanent full expensing and the £1 million Annual Investment Allowance remain.
R&D Tax Relief. The R&D relief scheme remains with promised simplification and digitisation. A new process is planned to increase certainty in advance for major investments.
Electric vehicles. The 100% first-year allowances for zero-emission cars and electric vehicle charge-points continue. These will apply until 31 March 2026 for Corporation Tax and 5 April 2026 for income tax.
Taxes
Capital Gains Tax (CGT). The lower rate of CGT goes up by 10% immediately to 18% and the higher rate from 20% to 24%. The 24% CGT rate on second properties doesn’t go up. Business Asset Disposal Relief (BADR) and Investors’ Relief will go up to 14% from 6 April 2025 and to 18% from 6 April 2026. Capital gains rules applying to the liquidation of Limited Liability Partnerships (LLPs) apply immediately.
Inheritance Tax (IHT). The freeze on the tax-free threshold for IHT will stay at £325,000 until 2030. As house prices continue to increase this means more families will pay IHT. Inheritance tax will apply to unspent pension pots from April 2027 so your retirement plans might need reviewing.
Corporation Tax. The government’s Corporate Tax Roadmap includes capping the top rate of Corporation Tax at 25%. The small profits rate of 19% and marginal relief up to taxable profits of £250,000 will also remain.
Income Tax. From April 2028 NICs and income tax thresholds will increase in line with inflation.
Value Added Tax. As we feared, VAT will apply to private school fees from 1 January 2025.
Furnished holiday lets. From 6 April 2025 the special tax arrangements for furnished holiday lettings will end.
‘Non-dom’ status. As expected, special tax status for non-domicile residents won’t apply from April 2025. It’s replaced by a residence-based scheme for the first four years of residence.
The tax gap
The government says it will invest in closing the gap between the amount of tax owed and what is received by HMRC. The initiative to close this tax gap is intended to raise £6.5billion in additional tax revenue per year by 2029/30. We can all look forward to additional rules and guidance.
If you would like to review how the Autumn Budget 2024 could affect your business just give us a call.
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