The Autumn Budget 2024, presented by Chancellor Rachel Reeves, brings big changes to UK financial policies. This budget, Labour’s first in 14 years, will impact small businesses nationwide. It includes £40bn in tax rises to shape economic growth and tackle fiscal challenges.
A major part of the budget is the £25bn hike in employers’ national insurance contributions (NICs) by the end of parliament. This has raised concerns about hiring and wage increases. The Office for Budget Responsibility (OBR) believes 60% of these costs could be passed on to workers and consumers by 2025-26.
Yet, the budget also has support for small businesses. The employment allowance will double to £10,500, helping one million small businesses. This change aims to meet the economy’s needs while easing small business pressures.
Key Takeaways
- £40bn in tax rises outlined in the Autumn Budget 2024
- £25bn expected revenue from increased employers’ NICs
- Employment allowance doubled to £10,500 for small businesses
- 60% of higher tax costs may be passed to workers and consumers
- International Monetary Fund endorses investment and sustainable tax rises
- Concerns raised about impacts on hiring and wages
- Budget aims to balance fiscal responsibility with economic growth
Key Changes in Autumn Budget 2024 Small Business Tax Measures
Increase in Employers’ National Insurance Contributions
Employers’ National Insurance Contributions (NICs) will go up significantly. This will raise £25 billion by the end of parliament. Experts say this could lead to 50,000 jobs being lost, on average.
Small Business Protection Through Employment Allowance
To help small businesses, the employment allowance will double. It will now be £10,500, up from £5,000. This will help about one million small businesses, giving them some relief.
The eligibility criteria in relation to the employers’ national insurance annual threshold of £100,000 has also been removed, allowing all businesses to take advantage of the employment allowance.
Capital Gains Tax Rate Adjustments
Capital gains tax rates will change. The lower rate will go from 10% to 18%, and the higher rate from 20% to 24%. Slightly less than what we expected but still notable in size.
Business Property Relief Modifications
Business Property Relief (BPR) on AIM stocks will not be completely removed. This decision aims to help businesses grow while also raising taxes.
| Measure | Change | Impact |
| Employers’ NICs | Increase | £25bn raised by end of parliament |
| Employment Allowance | Double to £10,500
All business eligible |
Benefits 1 million small businesses |
| Capital Gains Tax | Lower rate: 10% to 18%, Higher rate: 20% to 24% | Increased tax on investments |
| Business Property Relief | Partially retained | Supports AIM-listed companies |
These changes are a delicate balance. The chancellor wants to raise money but also support business growth. There are worries about the long-term effects of these changes on the economy.
Inheritance Tax Threshold Freeze Until 2030
The Chancellor has announced a freeze on Inheritance Tax (IHT) thresholds until April 5, 2030, maintaining the Nil Rate Band at £325,000 and the Residence Nil Rate Band at £175,000, which will incrementally increase tax burdens due to inflation.
Significant changes to tax reliefs include limiting Agricultural and Business Property Relief to 100% up to £1 million, with only 50% relief beyond that threshold, and reducing relief for AIM and quoted unlisted shares to 50%. These modifications will substantially impact family businesses and necessitate strategic succession planning to manage potential IHT liabilities effectively.
Economic Implications for Business Growth and Employment
The Budget shows a mixed view for UK businesses. It forecasts 1.1% real GDP growth this year, rising to 2.0% in 2025. Budget policies could boost real GDP by 0.6% at its peak in 2025-26. This growth could lead to more business investment and support for entrepreneurs.
The government plans to fund green technologies with £3.9bn. This move towards green investments might open new doors for renewable energy businesses.
But, the rising tax burden is a challenge. The tax-to-GDP ratio is expected to hit 38.3% by 2027-28. This increase, mainly due to higher employers’ National Insurance contributions, might make it harder for businesses to invest and grow.
The national living wage will increase to £12.21 per hour for those aged 21 and above. Apprentices and under 20’s will see increases to £7.55 and £10 respectively. This might put a strain on small businesses’ finances. With tax increases, businesses might offer smaller pay rises to workers to cover costs.
Despite these hurdles, the Budget offers support for businesses. There’s 40% relief on business rates in 2025-26 and more investment in mobile broadband. These steps aim to create a better environment for business growth and entrepreneurship.
Sector-Specific Impacts and Support Measures
Hospitality Industry Challenges
Pubs and restaurants are facing higher costs due to National Insurance Contributions and minimum wage hikes. The increase in the National Living Wage to £12.21 and additional increase to under 21-year-olds per hour from April will add more pressure.
Retail Sector Adaptations
Retailers are looking at new ways to hire and set prices because of tax changes. They need to balance higher labour costs with keeping prices competitive. Business investment incentives might help, but adapting to the changing economy is tough.
Service Industry Considerations
Service businesses, like beauty salons, are seeing big cost hikes. The government’s £100 billion plan for capital spending over five years could help with growth. But, they face immediate challenges in managing their rising costs.
Manufacturing Sector Response
Manufacturers are working on making their operations more efficient to deal with higher labour costs. The funding for 11 new green hydrogen projects across Britain could lead to innovation and growth. Yet, there are worries about how tax rises will affect important sectors like construction.
| Sector | Key Challenge | Potential Opportunity |
| Hospitality | Increased monthly costs | Adapting to new wage structures |
| Retail | BalancingAutumn’s costs and pricing | Exploring business investment incentives |
| Service | Rising operational expenses | Capitalising on government spending plans |
| Manufacturing | Offsetting labour cost increases | Green hydrogen project opportunities |
Conclusion
So, this Autumn’s Budget brings both challenges and opportunities. The government wants to balance public finances, but SMEs will see higher taxes and labour costs. Changes to inheritance tax could affect family farms and agricultural businesses.
Businesses across different sectors are adjusting to the new economic reality. There is no hiding that they will all face special challenges. The future of growth, employment, and investment in the UK is uncertain.
The government’s efforts to support small businesses while managing finances will be closely watched. The next few months will show if these policies help the UK’s small business sector.
