Autumn Budget 2024: Key Takeaways for Small Business Owners
The Autumn Budget 2024 has arrived, and if you’re running a small business, there’s a lot to digest. With adjustments to taxes, wages, and support measures, these updates will affect daily operations, employee costs, and growth plans. Here’s a breakdown of the most relevant changes and their potential impact on your business.
1. National Insurance Rate Increases
National Insurance (NI) contributions have risen to 15% on salaries over £5,000 (up from 13.8% on earnings above £9,100). This adjustment aims to raise an additional £25 billion for the government, yet it places a higher financial burden on businesses, especially those with lower-wage employees.
Impact: Small businesses may face cash flow challenges, potentially leading to hiring freezes or shifting towards part-time or freelance roles to avoid higher NI contributions. Employers should review staffing levels and salary bands to manage these added costs effectively.
2. Employment Allowance Increase
On the upside, the Employment Allowance has increased from £5,000 to £10,500, allowing smaller businesses to offset NI liabilities and providing relief against the heightened rates.
Impact: This change offers breathing room, helping small businesses maintain current staffing levels without financial strain. Businesses can use this buffer to invest in employees, offsetting some of the raised NI costs.
3. Corporation Tax Remains Steady
Corporation tax will remain at 25% on taxable profits over £250,000 until the next election. Though not an increase, steady inflation and rising operational costs could still impact businesses.
Impact: Small businesses under the profit threshold can plan around consistent tax obligations. However, businesses in growth stages may need to adjust tax planning as they approach the threshold.
4. Minimum Wage Increase
From April, the minimum wage for employees over 21 will increase from £11.44 to £12.21 per hour. Rates for 18- to 20-year-olds will rise to £10 per hour, moving towards a unified adult rate.
Impact: Payroll costs will increase for businesses in sectors with lower wages, such as hospitality and retail. Budget adjustments, price increases, or operational efficiencies may be necessary to meet the new wage requirements without sacrificing profitability.
5. Stamp Duty Surcharge on Additional Properties
The Stamp Duty surcharge on second properties will increase from 3% to 5%. Small businesses considering investment in real estate may see higher upfront costs, potentially deterring further investment.
Impact: Businesses reliant on property investments for revenue diversification will need to weigh the added costs against the benefits of new real estate acquisitions.
6. Affordable Housing Budget Boost
A £500 million boost has been allocated to the affordable housing budget, which may indirectly benefit businesses in construction, trades, and property development.
Impact: Small businesses in construction and related services may find new project opportunities, as the government works to meet affordable housing targets, potentially leading to increased demand for both direct projects and supporting services.
7. New Taxes on Vaping Products and Tobacco
From October 2026, a £2.20 tax per 10ml of vaping liquid will be introduced, alongside increased tobacco taxes above inflation rates. Businesses selling or producing these items will need to consider price changes or product diversification.
Impact: Retailers may face reduced demand for vaping and tobacco products as prices rise. This could drive the need for product diversification to maintain steady profit margins.
8. Fuel Duty Cut Extended
The 5p cut on fuel duty will be extended until April 2026, providing cost relief for businesses with significant transportation expenses.
Impact: Businesses reliant on logistics or delivery services will benefit from this extension, allowing them to allocate funds to other areas while managing fuel costs effectively.
9. Capital Gains Tax (CGT) and Inheritance Tax Changes
CGT on share profits will increase from 10% to 18% for the basic rate, and from 20% to 24% for the higher rate. Inheritance tax thresholds are frozen until 2030, with exemptions on inherited farmland reduced from 2026.
Impact: Small businesses considering asset or share sales will face higher CGT, highlighting the need for careful tax planning. Family-owned businesses may need to revisit succession planning to address the frozen inheritance tax threshold and more restrictive farmland inheritance rules.
Planning Ahead
The Autumn Budget 2024 presents a mix of new costs and opportunities. For small businesses, the priority will be to adapt quickly by using allowances like the Employment Allowance, adjusting hiring and salary strategies, and identifying areas to streamline costs. Strategic planning can help ensure that your business remains resilient in the face of these fiscal changes.
With the Employment Bill also just around the corner now is the best time to get your business checked out with our FREE HR Health Check.