It was a historic moment yesterday when the first female chancellor took centre stage to give her party’s plans for the UK finances.
Many rumours were leaked beforehand about what could be coming, which led to a lot of anxious business owners (amongst others!) eager to hear the Budget speech.
So, while it started off with the standard “We have a £22 billion black hole to sort” rhetoric, there were some interesting changes that affect small business owners.
So, was it good or bad? Let’s explore!
Note: We are aiming to highlight the key points of interest from a small business owner’s point of view. So we have omitted many announcements from our summary where we felt they we not note noteworthy.
Key themes
- The budget aims to raise £40 billion in additional tax
- There is an aim to reach 2% inflation target by 2029
- There were lots of announcements around new ‘rules’ the government are setting themselves, their commitments and the various review points
- There was a desire to put an ‘end to short-term-ism’
Key changes that affect small business owners
Minimum wages are rising from April 2025:
- Under 18s and apprentices: £7.55 per hour (+18%)
- 18 – 20: £10.00 per hour (+16.3%)
- 21+: £12.21 per hour (+6.7%)
Employers will have their Employer’s National Insurance bill increased by 1.25% to 15% from April 2025. The additional challenge to this is that the threshold at which NI needs to be paid is being lowered, from £9,100 to £5,000 per year.
To offset this, one positive piece of news for small business employers is that Employers Allowance is being raised from £5,000 to £10,500. This allowance allows you to reduce your employers NI bill if you qualify.
However, the net affect of the wage increase, factoring in the increase in Employment Allowance, is still a significant extra cost for most small businesses.
If you decide to sell your business, you will likely be paying more tax from 6th April 2025. If you qualify, you can usually claim ‘Business Asset Disposal Relief’ (which used to be called ‘Entrepreneurs Relief’) and the rate of tax is being changed from 10% to 14%, then raised again to 18% from 6th April 2026.
If you sell items like shares, crypto or non-residential property you will pay more tax as of yesterday(!). The rates have been increased:
- From 10% to 18% for basic rate tax payers
- From 18% to 24% for higher rate tax payers
These changes basically mirror the rates you already pay on selling a residential property (for example, a buy-to-let property you’ve sold).
The relief on business rates for businesses in the retail, leisure and hospitality sector the relief is being reduced to 40% (from 75%) from April 2025.
The small business relief is staying at the same rate (i.e. the ‘multiplier’ is not moving) for small businesses who qualify. This usually applies for properties under £15,000 rateable value. For other businesses, the ‘standard’ rate is going up slightly.
You will pay more interest on overdue tax. The government are increasing interest on unpaid tax bills by 1.5% from 6th April 2025.
Company car tax rates are also going up again. This is the percentage rates used to calculate the benefit in kind you get taxed on. The rates will rise by 2% in 2029, so an electric vehicle will have a ‘9% rate’.
Van or car? A double cab pickup truck will be classed as a car for tax purposes from April 2025. This is a very substantial change in tax outcomes for these vehicles, which currently are classed as a van, and therefore are taxed lower. The government made a U-turn on this during 2024, but has obviously decided it will now be happening!
Other noteworthy topics
Labour published their Corporate Tax Roadmap document alongside the budget. The most interesting part of the Roadmap was while confirming they will maintain (and cap) the 25% corporate tax rate, they have confirmed that:
- the 19% rate for profits under £50,000
and
- the ‘staggered’ (marginal) rate of tax paid before the 25% rate kicks in
will stay in place at current rates and thresholds.
There was mention of increased investment in HM Revenue & Customs. HMRC will recruit an additional 5000 new staff for the compliance department, and an extra 1800 debt management staff. They will also make investment in better tech, to be able to effectively collect tax.
Buried in the budget document there is also talk about simplifying the ‘customer experience’ and tax administration, with a package of measures coming Spring 2025. The document mentions working with small businesses to reduce the burden!
The amount you can have in your estate before paying Inheritance Tax is frozen still until 2030. This rate has been frozen since 2009 (although we have seen an additional threshold for residences added), so will have been at the same level for 21 years by the time it gets defrosted.
There was mention of tackling ‘umbrella companies’ (employment businesses) who are not complying with the law.
Buying a second home will cost more, as you will be charged higher rates of Stamp Duty Land Tax, rising from 3% to 5% from 31st October 2024.
Whilst it will not affect most small business owners, the Chancellor did confirm that ‘Non-Dom Tax Status’ is going from 2025. If you currently utilise this option, seek professional advice.
Autumn Budget 2024 summary
So, was this Chancellor’s first budget ‘good or bad’ for small business owners? We would say, it depends if you are an employer or not.
- If you are employer, it represents several key challenges to navigate. Therefore, you likely will see it as bad news.
- If you are not an employer, we think you could see it as relatively ‘ok’ news, because we appear to have some stability in tax rates.
This is particularly true in terms of limited companies in a wider tax sense, as there was the confirmation that the Small Profits Rate (19% rate under £50,000 profit) is staying. This seemed an easy target to be able to abolish, and still keep manifesto commitments, so its retention was very welcome news.
Of course, if you are trying to pass a farm down the generations (another story), buying a rental property, or selling your business, you might also be in the ‘bad’ camp!
Confused about how the Budget might affect your business finances?
Talk to your accountant about the effects on your business (and check out their views on your business finances too while you are there!)
If you don’t have an accountant, or feel you aren’t making the most of business allowances and tax schemes with your current accountant, get in touch.