The Autumn Budget 2024 will have an impact on businesses in the UK. As announced, taxes are set to rise by £40 billion, with a substantial £25 billion coming from increased employers' national insurance contributions. This adjustment exceeded initial forecasts, though it was not entirely unexpected. Click here if you're not sure what the Autmn Budget is.

The Labour government highlighted that the prior Conservative administration’s freeze on income tax thresholds led to more individuals facing higher tax rates as their incomes grew. Ms. Reeves emphasised Labour's commitment to "invest, invest, invest," aiming to put "more pounds in people's pockets," despite this being the most significant tax hike in a budget since 1993. What we always see is when individuals are prioritised there is a consequential impact on businesses.

Key Budget Changes:

Personal Taxes Impact

  • Income tax and employee NI rates remain unchanged.
  • Income tax band thresholds will unfreeze in 2028 to prevent bracket creep as wages rise.
  • Current CGT rates are 10% (basic) and 20% (higher). These are due to increase to new CGT rates of 18% (basic) and 24% (higher), effective 30 October 2024.
  • Residential Property Gains Tax Will Remain at 18% (basic) and 24% (higher).
  • Inheritance tax threshold freeze extended to 2030.
  • Carer allowance threshold raised to £195 per week.

Business Taxes Impact

  • VAT unchanged.
  • Employers to pay NI on earnings above £5,000, with the rate rising to 15%.
  • Employment allowance increased from £5,000 to £10,500.
  • Business Asset Disposal Relief rate goes up to 14% from 6 April 2025 but the non-BADR rate goes up from 30 October 2024. From 10% (basic) to 18% (basic) and 20% (higher) to 24% (higher).
  • Tax on private equity profits to increase to a maximum of 32%.
  • Corporation tax on profits over £250,000 remains at 25% until the next election.

Wages, Benefits, and Pensions Impact

  • National Living Wage paid to over-21s will go up by 6.7%. It is currently worth £11.44 an hour, but will increase to £12.21 in April 2025.
  • National Minimum Wage for 18 to 20-year-olds will see a 16% increase. For 18, 19 and 20-year-olds, the National Minimum Wage is £8.60, but will rise to £10 an hour in April 2025.

Other Notable Changes

  • New £2.20 tax per 10ml of vaping liquid from 2026.
  • Additional funds allocated for NHS, education, and housing initiatives.
  • Tobacco and non-draught alcoholic drink taxes to increase.
  • Inflation is expected to average 2.5% in 2024, with modest economic growth predictions through 2026.
  • Bus fare cap rises to £3 in January.
  • 5p fuel duty cut on petrol and diesel extended to April 2026.
  • Commitments to HS2 Euston station work and trans-Pennine rail upgrades.

Budget 2024 Impact on Businesses

So what is the Autumn Budget 2024 Impact on Businesses?

The increase in National Insurance contributions, coupled with a lowered threshold, is set to raise payroll costs significantly, creating challenges for businesses, particularly smaller ones. Although the employment allowance has been raised, this may offer limited relief, as these changes are likely to impact operational budgets directly.

The upcoming rise in the National Living Wage and National Minimum Wage will further impact business costs, as employers prepare for wage increases across various age groups. While these adjustments will benefit employees by improving earning potential, businesses will experience increased wage bills. These changes may lead some companies to reconsider hiring plans, employee hours, or other outsourcing to manage the cost increases.

In addition, changes to Capital Gains Tax (CGT), specifically the increase in both Business Asset Disposal Relief (BADR) and non-BADR rates, could discourage investment in company shares and potentially dampen market activity.

From 30 October 2024, non-BADR CGT rates will rise, with the basic rate moving from 10% to 18% and the higher rate from 20% to 24%. Additionally, from 6 April 2025, the BADR rate will climb from 10% to 14%, affecting business owners who may have been planning asset disposals under the previous, more favourable rate.

These combined measures are likely to introduce added financial pressures on businesses, limiting flexibility and potentially impacting growth and expansion strategies, particularly for small to medium enterprises looking to manage or exit investments. Another example of the Budgets negatvie Impact on Businesses

On the positive side, wage increases might improve consumer spending power, which could benefit retail and service sectors. However, extended freezes on inheritance tax and new taxes on lifestyle products (like vaping) may influence sectors differently. Overall, businesses will need to prepare for tighter budgets and more substantial compliance costs as these fiscal policies roll out.

What’s next?

Our team at MJ Kane, aims to help keep you right. Schedule a free consultation call today to discuss your businesses circumstances and understand what you need to do if the budget is causing you any concerns. If you already have a grasp, you may benefit more from one of our tax advice/planning meetings.

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