Autumn Budget 2024: Key Points for SMEs

The Autumn Budget, delivered by Chancellor Rachel Reeves on 30th October 2024, introduces a number of impactful changes for British businesses. Small business owners will find challenges and opportunities in reforms spanning wages, taxes and transport. Here’s what these announcements mean for you.

Wages and Employment Costs

Minimum Wage Increased

From April 2025, the National Living Wage will rise to £12.21 per hour for workers older than 21. Younger workers’ wages will also rise, with rates for 18 to 20-year-olds increasing to £10 per hour and apprentices seeing a boost to £7.55.

Small businesses employing minimum wage staff will face higher payroll costs. While positive for employee retention, this will require firms to consider budgeting or adjusting staffing levels.

National Insurance (NI) Changed

Employers will now pay NI on employees’ earnings over £5,000 (down from £9,100) with an increased rate of 15%. However, the Employment Allowance, which reduces NI liability, will increase from £5,000 to £10,500.

Many small businesses will have to adjust budgets to cover these additional expenses. While the higher Employment Allowance helps, it may not offset the extra cost entirely.

Pensions Reformed

With state pensions set to increase, businesses with older employees should stay informed about future changes, mainly as this demographic is critical for workforce planning.

Tax Adjustments Affecting SMEs

Capital Gains Tax (CGT) Increased

The rate on CGT for basic-rate taxpayers will increase from 10% to 18%. For higher-rate taxpayers, it will rise from 20% to 24%. These rates will align with existing rates for property.

This affects small business owners planning to sell shares or investments. Business owners may need to reconsider their exit strategies or plan sales before these rates take effect.

Corporation Tax Untouched

The primary corporation tax rate remains 25% for profits over £250,000. Businesses under this threshold remain unaffected, but those with profits exceeding it should expect consistent tax expenses and plan accordingly.

Private Equity Tax Increased

Tax on private equity managers’ profits, often called ‘carried interest’, will rise to 32% from April 2025. For small businesses involved in private equity or seeking investment, this could affect deal structuring and investor interest.

Inheritance Tax Reformed

From April 2027, pension savings will be included in estates subject to inheritance tax (IHT), and from April 2026, certain assets like farms and family businesses will be taxed if valued above £1 million.

Family-owned companies must plan for succession more carefully. This change may prompt business owners to reassess estate planning strategies with financial advisors.

Income Tax Bands Frozen Until 2028

The freeze in income tax thresholds will continue, meaning pay increases could push employees into higher tax brackets sooner. This affects individual employees and small business owners, who may need to consider the implications for payroll adjustments and employee satisfaction.

Hospitality and Retail

Alcohol Tax Adjusted Both Ways

Non-draught alcoholic drinks will see a tax increase, while draught will fall by 1.7%. Pubs, bars and restaurants may find some relief for draught sales, but prices for bottles and cans may rise, influencing purchasing behaviour.

Tax on Vaping and Smoking Increased

Tobacco and vaping products will see higher tax rates, with the latter reaching £2.20 per 10ml by October 2026. Retailers selling these products may experience changes in consumer spending.

Transport and Logistics

Fuel Duty Freeze Extended

Fuel duty remains frozen, with the 5p per litre cut retained. Businesses reliant on vehicles benefit from cost stability here, making transport-related expenses more manageable.

Bus Fare Cap Increased

England's cap on single bus fares will rise from £2 to £3 in January 2025. This fare increase may affect employees' travel costs, potentially impacting staff retention in lower-paid roles.

Rail and HS2 Funding Boosted

Additional government funding will support rail line upgrades, including the trans-Pennine route between York and Manchester. Improved transport infrastructure may ease commutes and expand regional talent pools for small businesses in the north.

Property and Construction

Affordable Homes Budget Boosted

The affordable homes budget will receive a £500 million boost, supporting development and construction in the UK. For small construction firms, this budget increase may mean more contracts and opportunities in affordable housing projects.

Social Housing Rent Increased

Social housing providers can now raise rents above inflation. Property managers and investors in social housing may see an increase in rental income but should remain mindful of potential regulatory changes.

VAT on School Fees Introduced

A new 20% VAT on private school fees starting January 2025 may increase operating costs for educational institutions. Small private schools will likely raise tuition fees, impacting affordability and potentially lowering enrolment figures.

Preparing for Change

The Chancellor’s’ Autumn Budget introduces significant changes affecting small businesses across various sectors. Business owners are encouraged to review these adjustments and consult with financial advisors to prepare for the upcoming fiscal changes.

While challenges such as rising employment and tax costs present hurdles, new investment opportunities could provide avenues for growth.

Financing Operational Shifts

At BusinessComparison, we can help SMEs move with tax changes by securing the most suitable business finance option. Whether your business faces increased operational costs or a growing wage bill, a tailored business loan could solve your financial challenges.

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