Following some fear of what was to come, the UK government has finally published its Autumn Budget for 2024. Chancellor Rachel Reeves had already informed the public of a £22bn overspend inherited from the previous government and the Autumn Budget has now put in place measures to address this with a total £40bn rise in taxes.
With the announcement of the Autumn Budget and these planned tax rises, UK businesses are once again adapting to a fresh set of policies and measures. The changes and new policies put in place by the Chancellor cover a vast array of areas which may have both positive and negative implications for your business. We have outlined the key measures you need to be aware of as you understand how the Autumn Budget could significantly affect your operations, costs and strategic planning both now and looking ahead to 2025.
National Living Wage Increase
One of the most notable announcements made by Reeves is a 6.7% increase in the National Living Wage to £12.21 per hour from April 2025. Those aged 18-20 will also benefit from a significant increase from £8.60 to £10 and apprentices will see their hourly wage increase to £7.55 from £6.40.
For employees, this announcement will come as welcome news amidst the pressures of inflation and rising living costs. However, it is important to note that a National Living Wage increase also brings higher payroll costs for you as an employer (particularly if the majority of your workforce is made up of lower-wage employees as is often the case in the retail and hospitality sectors). You will need to think carefully and budget accordingly for the wage increase, which may also require a review of operational efficiency to ensure that you can absorb the additional costs without hampering the profitability of your business.
Increased Employer National Insurance Contributions
In addition to a Living Wage increase, employee costs will also rise due to an increase in the amount employers are expected to contribute towards National Insurance. As announced in the Autumn Budget, the rate of employer National Insurance contribution will increase to 15% from April 2025. Currently, employers contribute 13.8%.
National Insurance helps the government to fund social security benefits such as the State Pension. It’s anticipated that this employer increase will help raise a huge £25billion but ultimately could come at the expense of profitability for businesses. Careful financial planning and considered hiring policies will be key to ensuring your business is prepared for this increased cost before 2025.
Capital Gains Tax & Business Asset Disposal Relief Changes
As anticipated, the Autumn Budget also introduces adjustments to Capital Gains Tax rates. The main changes you need to be aware of are:
- An immediate increase in the rate of Capital Gains Tax from 10% to 18% and 20% to 24% for the higher rate. This increase will not apply to Capital Gains Tax on residential property assets which remain at rates of 18% and 24%.
- An increase in the rate of Capital Gains Tax charged on assets which qualify for Business Asset Disposal Relief and Investors’ Relief from April 2025 onwards. Disposals made on or after the 6th April 2025 will be subject to Capital Gains Tax at 14% while those made on or after the 6th April 2026 will be subject to the same tax at a higher 18% rate.
These tax hikes will have a significant impact on any business owners planning to sell business assets in 2025 or close their business via the Members Voluntary Liquidation (MVL) process. An MVL is currently deemed a tax-efficient way of extracting funds from a solvent business but those considering the process are wise to carefully evaluate the timing of such a decision if they want to guarantee benefitting from Business Asset Disposal Relief at the current rate.
Business Rate Relief For Retail, Leisure & Hospitality
While much of the Autumn Budget seems set to pose challenges for UK businesses, the Chancellor’s new policies also provide welcome relief for companies in particular sectors. The high street has been hit quite significantly by cautious customers and the cost of living crisis. In a bid to support businesses in these areas, namely retail, hospitality and leisure, the government has announced a 40% relief (up to a limit of £110,000) on business rates.
This relief may help your business to ease operational pressures and withstand the strain of other budgetary changes, allowing for investment in growth that may otherwise not be possible in the current climate.
Fuel Duty Freeze
The government has also once again implemented a freeze on fuel duty, providing stability, particularly for businesses that rely on transportation. The Autumn Budget has also extended the existing temporary 5p deduction on fuel duty for another year. For companies with logistics, delivery or commuting expenses, this freeze helps to curb potential increases in fuel costs and manage inflationary pressures. While these measures do not explicitly reduce current fuel expenses, they offer some degree of cost control which can be critical when financial planning in an otherwise volatile economy.
Our Thoughts
The Autumn Budget represents what was always going to be an incredibly tricky task for a new government. However, there is no doubt that the effects of these new fiscal policies will be strongly felt across all industries. Businesses of all sizes have no choice but to plan carefully and take significant steps to adjust to the realities of widespread tax increases. Proactive planning – whether it involves cutting your business costs or considering operational restructuring – will be key in helping you weather these changes as the new tax year approaches in April 2025.
If you are concerned about how the Autumn Budget may impact your business or need help implementing strategies to overcome these new challenges, do not hesitate to get in touch with the team here at Ballard Business Recovery. Our business rescue experts can provide you with tailored advice and help you implement measures to display resilience in challenging economic times.
