Chancellor Rachel Reeves’ 2024 Autumn Budget introduces some critical changes that will impact UK business owners, entrepreneurs, and SMEs. Here, we break down these updates into the essentials you need to know. These changes, affecting Employment Taxes, Corporate Taxes, Capital Gains Tax and other areas, may come with challenges but also some opportunities.

Gary Jesson, EFM managing director states that this is the first budget in a while with a lot for businesses and busy directors and where changes in one area, impact other areas of tax –e.g. increases in national insurance can improve R&D claims as noted above and may also push an SME into a lower tax rate through lower profits.

It is, therefore, more important than ever to get an external financial perspective and a full understanding of the tax impact on your business of these changes and consequential business reactive changes, so as not to make a costly mistake.

Below our tax specialists, Jessica Cowling and Richard Lupson-Darnell, identify all the important details of the changes.

1. Employment Taxes: Key Financial and HR Implications

The 2024 Autumn Budget brings several significant employment tax changes, impacting National Living Wage (NLW), National Minimum Wage (NMW), and National Insurance Contributions (NIC).

Starting in April 2025:

• The National Living Wage (NLW) will increase by 6.7%, from £11.44 to £12.21 per hour.
• For younger workers, the National Minimum Wage (NMW) will rise from £8.60 to £10 per hour.
• The Employer NIC rate will increase from 13.8% to 15%, with the NIC threshold decreasing from £9,100 to £5,000 per year.

Additionally, the Employment Allowance will rise from £5,000 to £10,500, now available to more businesses.

Our Tax Advice: 

A silver lining for R&D-focused businesses: these NIC increases can positively impact R&D claims, as personnel costs, including employer NIC, qualify as R&D expenditure. If your business falls under the tax credit cap (£20,000 plus 300% for the companies relevant PAYE and NIC liabilities), this may boost your R&D cash benefits slightly. 

Additionally, for companies which have accrued bonuses which are usually paid per annum post April, we recommend that if cash ?ow is available these are paid pre-April to attract more favourable employers NIC rates and liabilities. 

Samantha Gallagher, Talent & Engagement Director at MPA notes that these changes call for strategic workforce planning. “SMEs must adjust their budgets for wage increases and NIC changes while fostering employee morale through transparent communication and career development. Additionally, upskilling existing employees, exploring cost-effective hiring methods like referral programs, and leveraging apprenticeships can help offset increased costs.” Samantha emphasises that enhanced operational efficiency will be key for SMEs to adapt sustainably.

2. Corporation Tax: Encouraging Investment and Long-Term Planning

The budget outlines a Corporate Tax Roadmap to support long-term investments and economic stability over the next five years.

• The headline Corporation Tax rate remains at 25%.
• Capital Allowances, including the £1 million Annual Investment Allowance (AIA) and full expensing, will continue, with possible expansions for leased assets.
• R&D Relief remains unchanged, with plans to streamline access and improve administrative processes.

Our Tax Advice:

We believe that this is positive outlook for our clients speci?cally those who fall within the innovation sectors, the road map can provide some comfort to our clients to keep on investing and developing within their industry.

3. Capital Gains Tax (CGT): Strategic Exit Planning

The changes to CGT affect business owners considering asset sales or exit strategies. Effective October 30, 2024:

• CGT rates rise from 10% to 20% and from 18% to 24%.
• Business Asset Disposal Relief (BADR) rates, which offer reduced CGT rates on lifetime gains up to £1 million, will increase from 10% to 14% in April 2025 and 18% in April 2026.

Our Tax Advice:

With this change in mind, we encourage our clients to be forward thinking with any tax planning they may be considering and utilise this relief sooner rather than later to attract more favourable CGT rates, particularly before April 2025 increases.

4. Inheritance Tax (IHT): Estate Planning for Business Owners

The budget caps Business Property Relief (BPR) and Agricultural Property Relief (APR), reducing the scope for tax-free transfers for business and agricultural assets starting in 2026.

• From April 6, 2026, transfers eligible for BPR and APR will be capped at £1 million.
• Unused pension funds and death benefits will also enter an individual’s estate for IHT purposes from April 2027.

Our Tax Advice:

Client should consider effective tax planning before these changes come info affect and we welcome conversations around these areas, in particular where individuals are looking to pass on their wealth and businesses to descendants.

5. Stamp Duty Land Tax (SDLT): Strategic Real Estate Investments

The SDLT rates on residential properties purchased through companies will increase, affecting property investment strategies.

From October 30, 2024:

• SDLT on properties over £500,000 purchased through companies will rise from 15% to 17%.
• Additional SDLT on second or buy-to-let properties will increase from 3% to 5%.

Our Tax Advice:

When buying residential property, it is important to consider the vehicle you are purchasing through, as there are clear disincentives for using a corporate vehicle however in the right circumstance it may still be appropriate.

Helping You Navigate the Changes

With the complexities of the 2024 Autumn Budget, having the right support plays a crucial role in guiding business owners through these changes. 

Jonathan Wheeler, EFM's Operations Director notes that the changes place a heavy burden upon businesses of all sizes due to the increase to Employer’s NI, not only the 1.2% increase but the reduction in the starting threshold. Coming alongside an inflation-busting 6.7% rise in the National Minimum Wage, and significant changes to employment law, higher National Insurance contributions will be a bitter pill to swallow for UK businesses with SMEs possibly being most impacted, with the increase in the Employers Allowance giving little relief to many. 

Rigorous forecasting and stress testing of these forecasts will be vital for businesses looking to absorb these cost increases or pass some or all of them on by way of price increases, and the pain will most keenly be felt in small businesses with limited cash resources and limited access to sources of funding.

For entrepreneurs and owners of growth businesses as well as those investors in these businesses there is more bad news. This budget contains increases to CGT and gradual increases to BADR which means taxes on investors and founders going up, but perhaps on this occasion founders’ worst fears have not quite materialised and some form of balance has been struck, including maintaining all R&D investment reliefs.

Contact us to learn how we can assist you in strategically navigating these shifts for long-term success.