What the Autumn Budget 2024 Means for Small Businesses and the Self-Employed!
The Chancellor’s Autumn Budget 2024 has arrived, bringing several significant updates for businesses and self-employed individuals across the UK. Many of these changes, set to take effect in April 2025, will impact employers, workers, and various industries from retail to hospitality. If you’re a business owner in Dover, Folkestone, or Deal, these updates could have a substantial effect on your financial planning, tax obligations, and payroll costs.
AFS Accountancy Services have brokens down the main highlights of the budget so you can start preparing your business for what lies ahead.
1. Increase in Employer’s Class 1 National Insurance Rate
One of the major announcements in this year’s budget is the increase in the Employer’s Class 1 National Insurance (NI) rate. Currently, businesses pay a National Insurance contribution on behalf of their employees at a standard rate of 13.8%. Starting from 6th April 2025, this rate will rise to 15%.
What does this mean for small businesses?
For business owners with multiple employees, this 1.2% increase might not seem much at first glance, but it will lead to a noticeable rise in overall payroll expenses. For instance, if your business has several employees with an average annual salary of £30,000, this increase could add thousands to your NI bill over a year.
Preparing for this change will be essential. Small businesses should evaluate how this additional expense could impact their overall profitability. You may need to adjust budgets, streamline operations, or explore other cost-saving strategies to absorb this additional cost without affecting your bottom line.
2. Lower Employer’s National Insurance Threshold
In another shift, the threshold for paying employer’s National Insurance contributions will be reduced. Currently set at £9,100, it will drop to £5,000 from April 2025. This means that businesses will be required to pay National Insurance contributions on employee earnings that exceed £5,000 annually, rather than the current £9,100 threshold.
Impact on payroll expenses
This change will significantly impact small businesses, as it will effectively mean more of your payroll is subject to NI contributions. This will be particularly important for businesses that employ part-time or lower-wage staff, as more of their earnings will now be subject to these contributions. For some small businesses, this could mean recalculating payroll budgets to ensure adequate cash flow to cover these additional costs.
3. Increased Employment Allowance
To help offset some of these increased costs, the government is raising the Employment Allowance from £5,000 to £10,500. This allowance reduces the amount of National Insurance that qualifying small employers have to pay, and the increase could be beneficial for many small businesses.
Who qualifies?
Not all businesses are eligible for Employment Allowance. Generally, it’s intended for smaller businesses with a lower total payroll. This increase to £10,500 from April 2025 could significantly reduce the NI burden for those who qualify, making it easier for smaller enterprises to afford the increased NI rates and reduced threshold.
For small employers, this increase could mean the difference between maintaining their current workforce and needing to cut back on hours or headcount to balance the books. If you’re unsure whether your business qualifies for this allowance, now is a good time to check with an accountant to see if you can take advantage of this benefit.
4. Corporation Tax Rate Cap
The Corporation Tax rate cap remains a topic of interest for all UK business owners, and this budget confirmed that the main Corporation Tax rate will stay at 25%. The small profits rate, applying to companies with profits of £50,000 or less, will remain at 19%.
How this affects small businesses
The stable Corporation Tax rate provides some predictability for business owners in terms of tax planning. However, companies close to the £50,000 profit mark may wish to consider their tax planning options carefully to maximise their eligibility for the small profits rate. With proactive planning, you may be able to maintain a lower effective tax rate, allowing you to reinvest savings back into your business.
5. Increase in National Living Wage
The government has announced an increase in the National Living Wage (NLW), rising to £12.21 per hour for workers aged 23 and above, and £10 per hour for those aged 18-20. This change will also take effect in April 2025.
Impact on small businesses and the self-employed
This increase means higher payroll costs for employers who pay at or near the NLW, particularly in industries like retail, hospitality, and care services, where many employees are on minimum wage contracts. Business owners will need to prepare for these rising labour costs and consider whether price adjustments, efficiency improvements, or workforce changes might be necessary.
6. Capital Gains Tax Adjustments
Capital Gains Tax (CGT) will also see a shift, with the lower rate increasing to 18% and the higher rate rising to 24%, effective immediately.
What does this mean for business owners and landlords?
If you’re a business owner or a landlord planning to sell assets or property, this change could impact your tax liability. A higher CGT rate means that gains on the sale of business assets, investment properties, or other assets could result in a larger tax bill. To minimise the impact, consider speaking to a financial adviser about tax planning strategies, such as utilising any available reliefs or allowances before making significant asset sales.
7. Fuel Duty Freeze Maintained
With the ongoing cost of living concerns, the government has opted to maintain the freeze on fuel duty for the 2025/26 tax year. This will likely be welcome news for businesses reliant on transportation or logistics.
Impact on businesses
While fuel costs are often unpredictable, the freeze provides some short-term relief for small businesses dependent on vehicles for operations. For example, companies in delivery, logistics, and mobile services may find this freeze helpful in managing operational expenses. However, businesses should still consider efficiency measures, such as route planning and fuel-efficient vehicles, as part of long-term cost-saving strategies.
8. Reduced Business Rates Relief for Retail, Hospitality, and Leisure
One of the less favourable changes in the budget is the reduction in business rates relief for the retail, hospitality, and leisure sectors in England. Starting in April 2025, this relief will drop from 75% to 40%.
What this means for affected businesses
For small businesses in these sectors, this reduction in relief could lead to a substantial rise in operating costs. Retailers, restaurants, pubs, and entertainment venues are particularly sensitive to changes in fixed costs like business rates, so this reduction in relief may affect cash flow, particularly during off-peak seasons.
If you’re a business owner in these sectors, now is a good time to assess how these changes might impact your 2025 financial forecasts. Consider consulting with a financial expert to explore possible savings or alternative financing options.
Conclusion: Planning Ahead with AFS Accountancy Services
The Autumn Budget 2024 presents a mixture of opportunities and challenges for small businesses and self-employed individuals. While the rise in NI rates, lower thresholds, and reduced business rates relief will bring higher costs, the increased Employment Allowance and stable Corporation Tax rate offer some relief.
Preparing for these changes now, rather than in April 2025, will allow you to adapt your business strategy in a timely and controlled manner. At AFS Accountancy Services, we are here to support businesses in Dover, Folkestone, Deal, and beyond, offering tailored advice and planning strategies to help you navigate these updates. Contact Me today to discuss how we can help your business thrive in the evolving financial landscape.
Stay informed, and let us help you make the most of every opportunity in the year ahead.