The Autumn Budget 2024, presented by Chancellor Rachel Reeves on 30 October, introduced several measures that will significantly impact UK businesses. Understanding these changes is crucial for strategic planning and compliance.
Employer national insurance contributions (NICs)
A notable change is the increase in employer NICs. From April 2025, the rate will rise by 1.2 percentage points to 15%, and the threshold at which businesses start paying NICs will lower from £9,100 to £5,000. This adjustment aims to generate additional revenue for public services but will increase business employment costs. Companies should assess their payroll budgets and consider the financial implications of this change.
National living wage increase
The national living wage is set to increase by 6.7%, reaching £12.21 per hour. This rise is intended to support low-paid workers amid the cost-of-living crisis. While beneficial for employees, it will elevate wage bills for employers. Businesses must plan for these increased labour costs and explore strategies to maintain profitability without compromising employee welfare.
Capital gains tax (CGT) adjustments
The Budget outlines changes to CGT rates. For basic rate taxpayers, the rate will rise from 10% to 18%, and for higher-rate taxpayers, it will increase from 20% to 24%. These adjustments, effective from 30 October 2024, will affect businesses involved in asset disposals. To mitigate tax liabilities, it’s advisable to review investment strategies and consider the timing of asset sales.
Business asset disposal relief (BADR) changes
Changes to BADR are also on the horizon. While the current rate remains at 10% for the remainder of the financial year, it will increase to 14% from April 2025 to 18% from 2026. This relief, previously known as entrepreneurs’ relief, is crucial for business owners planning to sell their enterprises. Understanding these changes is essential for effective exit planning.
Corporate tax roadmap
The government has introduced a corporate tax roadmap, capping the corporation tax rate at 25% for the duration of the Parliament. This move aims to provide stability and predictability, encouraging businesses to invest and grow. Companies can plan their tax strategies more confidently, knowing that the corporation tax rate will remain unchanged.
Support for research and development (R&D)
The Budget includes increased funding for R&D initiatives, with a new £25m multi-year R&D missions programme and additional support for the National Institute for Health and Care Research. These investments aim to drive innovation and productivity. Businesses engaged in R&D activities can expect enhanced funding and support, presenting opportunities for growth and development.
Impact on specific sectors
The Budget’s measures will have varying effects across different sectors.
- Retail and hospitality: Increasing employer NICs and the national living wage will raise operational costs. To manage the impact, businesses in these sectors should evaluate their pricing strategies and operational efficiencies.
- Manufacturing: Higher employment costs and changes to CGT may affect investment decisions. Manufacturers should assess their financial plans and consider the timing of capital investments.
- Technology and Innovation: Increased R&D funding presents growth opportunities. Companies in these sectors should explore available grants and incentives to support their innovation efforts.
Planning ahead
The Autumn Budget 2024 introduces significant changes that will affect businesses across the UK. It’s essential to stay informed and be proactive in adapting to these developments. At Thompson Wright, we are committed to helping our clients navigate these changes effectively.
Our team is ready to provide tailored advice and support to ensure your business remains compliant and thrives.