Autumn Budget 2024: What Small Business Owners and Entrepreneurs Need to Know

Autumn Budget 2024: What It Means for Small Businesses and Entrepreneurs

The Autumn Budget 2024, presented by Chancellor Rachel Reeves, outlines a vision for stabilising the economy and boosting growth, with specific changes that will impact small businesses and entrepreneurs. Here’s the autumn budget small business owners!

1. Employer National Insurance Contributions (NICs)

Starting in April 2025, employer NICs will increase by 1.2 percentage points, from 13.8% to 15%. Additionally, the threshold for paying NICs will drop from £9,100 to £5,000. This change is expected to raise £25 billion annually by the end of the forecast period.

While this increase might challenge small businesses’ payroll budgets, the government has doubled the Employment Allowance from £5,000 to £10,500. This means 865,000 smaller businesses won’t pay any NICs at all, allowing many small businesses to employ up to four full-time minimum-wage employees without additional NIC costs.

2. Capital Gains Tax (CGT)

To support long-term investment over quick profits, CGT rates will increase:

• Basic-Rate Taxpayers: The CGT rate goes from 10% to 18%.

• Higher-Rate Taxpayers: The rate rises from 20% to 24%.

  
  

However, the Business Asset Disposal Relief (BADR) lifetime allowance remains at £1 million, allowing business owners a reduced 10% CGT rate when selling their business. Starting in 2025, BADR will gradually increase to 14% and later to 18% by 2027, encouraging business reinvestment and growth.

3. Business Rates Relief

For retail, hospitality, and leisure businesses, the Budget introduces a 40% relief on business rates for the 2025–26 tax year, capped at £110,000 per business. This relief aims to ease the tax burden on businesses operating in high-street sectors, especially beneficial for small businesses in these industries.

The small business multiplier, which sets the tax rate for smaller properties, will also be frozen next year, offering more stability and predictability in property tax expenses.

4. National Living Wage Increase

The Chancellor announced an increase in the National Living Wage to £12.21 per hour (up 6.7%), translating to an extra £1,400 per year for full-time workers. While this boosts spending power, it may also lead to higher wage costs for small businesses with hourly staff. However, the government believes this increase will stimulate the economy by putting more money into the hands of consumers.

5. Support for Small Business Growth

To help small and medium-sized enterprises (SMEs) access investment, the government has extended the Enterprise Investment Scheme (EIS) and Venture Capital Trust (VCT) schemes until 2035. These schemes offer tax reliefs to investors, making it easier for small businesses to attract investment for growth. For innovative industries, the government has also protected over £20 billion in Research and Development (R&D) funding, encouraging tech-driven small businesses to innovate.

6. Corporation Tax Stability

While corporation tax remains at 25%, among the lowest in the G7, the Chancellor introduced a Corporate Tax Roadmap. This provides clarity on future corporate tax policy, allowing small businesses to plan and manage growth investments with confidence. Additionally, full expensing for plant and machinery investments is maintained, as well as the £1 million Annual Investment Allowance, making capital investments more tax-efficient.

7. Incentives for Clean Energy and Transport

To foster the transition to clean energy, the government will maintain incentives for electric vehicles (EVs) in Company Car Tax, starting from 2028. Small businesses operating fleets may benefit from increased subsidies and tax reliefs on EVs, helping them reduce both carbon footprints and long-term fuel costs.

The government is also freezing fuel duty for another year, meaning petrol and diesel prices at the pump will not increase due to tax changes. This decision keeps transportation costs stable, which is especially helpful for logistics-heavy small businesses.

Key Takeaways for Small Businesses and Entrepreneurs

The 2024 Budget focuses on long-term stability, sustainable growth, and encouraging reinvestment in the UK economy. Here’s what small businesses should prepare for:

• Budget for Payroll Increases: Plan for the new NIC rates and the higher National Living Wage. Consider using the expanded Employment Allowance to offset some of these costs.

  
  

• Review Investment Strategies: The CGT changes and continued support for schemes like EIS may make reinvesting in business growth more attractive than asset sales.

  
  

• Leverage Tax Reliefs: For retail, hospitality, and leisure, the business rates relief is significant. Additionally, consider full expensing and R&D incentives for any capital or innovation projects.

  
  

• Plan for Green Investments: Look into incentives for transitioning to electric vehicles or other sustainable practices, as these may provide both tax benefits and operational savings.

  
  

In summary, while the Budget introduces some cost increases, it also offers substantial support and stability measures that can help small businesses plan, invest, and grow over the coming years. Check out the full budget here: Autumn Budget 2024

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