The long-awaited Autumn Budget has finally been announced by the new Labour government, bringing a blend of challenges and opportunities for businesses of all sizes in the UK. The latest budget addresses concerns surrounding inflation and overspending by the previous government and puts in place a series of measures and tax rises in response. Many of these changes will have a significant impact on small businesses in particular – here’s what you need to know about how your operations may be affected by the Autumn Budget 2024.
Rising Wage Costs
At the forefront of headlines from the Autumn Budget 2024 is an increase to the National Living Wage. Aimed at supporting workers with the rising cost of living, this announcement will see the National Living Wage rise to £12.21 per hour from April 2025, with those in apprenticeships also seeing a significant hourly wage increase. While positive for employees, these increased wage costs have the potential to put pressure on the growth plans of small businesses. It will be sensible to evaluate your staffing needs ahead of the wage increase to ensure that your business can cope appropriately with the possibility of added wage expenses.
Reprieve From Increased Employer National Insurance
In addition to a National Living Wage increase, the Autumn Budget will also increase payroll costs by requiring employers to make greater National Insurance contributions. Currently, you are required to pay 13.8% National Insurance on your employees but this will rise to 15%, also in April 2025.
Despite this hike representing further additional costs for businesses in the UK, small businesses should welcome the additional news that the employment allowance will be increasing. To support smaller employers with the rise in contribution amounts, the employment allowance will increase from £5,000 to £10,500. This means that many small businesses will actually not be required to pay any National Insurance or may pay less than they are currently. You should take the time to understand whether this will apply to you or not as you may discover that this Autumn Budget change actually frees up capital to reinvest in other areas as opposed to increasing your employee costs.
Permanent Relief On Business Rates
For small businesses in the retail, hospitality and leisure sectors with physical premises, the Autumn Budget has introduced a permanent relief on business tax rates. Small business owners were starting to prepare for the challenges that would come with the removal of the current 75% business rates discount. However, the Chancellor has now confirmed that this will be replaced by a permanent 40% discount of up to £110,000 per business. The tax multiplier for small businesses will also be frozen next year, providing you with further breathing space from the possible rising costs of maintaining your premises.
Capital Gains Tax Hike
As widely speculated, the Autumn Budget 2024 has also confirmed an increase in Capital Gains Tax Rates. The rate of Capital Gains Tax paid on assets which qualify for Business Asset Disposal Relief will also increase, which may have a significant impact on any small business planning to sell their assets or close via means of a Members Voluntary Liquidation. Both the lower and higher rates of Capital Gains Tax will be increasing, so it is important to plan carefully if you have any plans to sell assets or shares and want this to be a tax-efficient process.
Next Steps For Small Businesses
With varying challenges and changes for small businesses contained in the Autumn Budget, it is important that you are proactive in your response.
You can first start adjusting to the Autumn Budget by assessing your eligibility for new reliefs and thresholds, such as the relief on business rates, to take full advantage of the financial support available to your small business. Secondly, start preparing for possible increases to your wage costs by revisiting your budget for the next tax year and understanding the efficiency of your operations. Effective planning now will ensure that your business is best prepared when most of the measures come into force in April 2025.
If you are concerned about how the Autumn Budget may impact you, it’s also a good idea to seek professional advice. At Ballard Business Recovery we specialise in helping businesses understand their growth and rescue opportunities when faced with challenges, and have vast experience equipping small businesses with the tools they need to weather uncertainty. Get in touch with us now to find out how we can help your small business.
