6 ways the Autumn Budget could impact small businesses

Chancellor Rachel Reeves will reveal her 2024 autumn budget on Wednesday, October 30. 

This is an important moment for any government - but it’s especially important for the new Labour government. Just over three months since coming into office, this is Labour and Reeves’ first opportunity to set out Labour’s financial plans. To present the country with a roadmap on how they plan to fill the much discussed £22bn black hole and fuel growth in the British economy. 

Rumours always swirl ahead of budgets - but speculation seems to have reached fever pitch this time, with many believing this is the first chance for Labour to put some meat on the bone of their plans. 

And small businesses look on with particular interest. Since winning the general election in July 2024, Labour continue to make it clear that they are the party for business, with several pledges made as part of their business partnership for growth. 

The chancellor has suggested any increase in revenue to the Treasure is likely to be done through a combination of tax rises and spending cuts. She’s reiterated many times that this will neither be at the expense of working people or through a return to austerity - and this week Reeves confirmed a technical change to the way debt is measured to free up billions for new infrastructure.

So what has the chancellor got planned for her 2024 autumn budget? How might she raise the money needed and continue to prioritise small businesses as promised? Let’s round-up some of those rumours ahead of Budget Day.

More clarity for SMEs with a business tax roadmap

As we’re still very much in the early days of the Labour government - there are increasingly strong suggestions that the chancellor will unveil a business tax roadmap during the budget next week. This would allow small business owners to get a sense of the direction of travel and understand what might be coming that will affect their business in the coming years.

Corporation tax freeze

Labour has already said they will cap corporation tax at 25% for the duration of this parliament. Corporation tax is the tax businesses pay on their profits - so a cap, at least, is welcome news.

Help for high street retailers with a reduction in business rates

Corporation tax aside, there are still plenty of unknowns - particularly around business rates. During the election campaign and since, Labour say they want to “level the playing field between the high street and online giants, better incentivise investment, tackle empty properties and support entrepreneurship.” 

Business rates are a logical starting point for this. The British Retail Consortium recently shared an open letter signed by over 70 retail CEOs with the chancellor asking her to reduce business rates on retail properties by 20%. This would be a significant saving and help high street businesses compete with online retailers.

Business rate calculations can be complicated, but in a nutshell they are based on a property’s rateable value - an estimate by the Valuation Office Agency of how much it would cost to rent a property for a year on 1 April 2021. Rates are charged on most non-domestic properties - including shops, pubs and warehouses. A reduction in business rates could help balance the playing field and be welcomed by high street businesses.

Increased tax on dividends

Business dividends could also be in the scope of things to change. Dividends are shares of business profits paid to shareholders. And the tax on dividends is less than income tax rates at the moment, making them a popular choice for business owners. If the rates were to tick up and align with income tax it would simplify personal tax generally, but it could impact small businesses' approach to paying its shareholders.

A rise on employers National Insurance contributions

Labour’s tax plans could go in a number of ways. They’ve repeatedly stated they will not increase income tax, National Insurance and VAT. This was a manifesto pledge and one they’re clearly keen not to break.

But then more recently, Prime Minister Sir Keir Starmer didn’t rule out a National Insurance rise for employers. And this weekend, a rise was all but confirmed.

Class 1 National Insurance is typically made up of two payments - one that’s deducted from an employee’s salary directly and another which is paid by the employer. It is an increase to the latter which rumours suggest could rise, alongside a potential levy on employers’ pension contributions. Both of these would have a direct impact on small businesses with employees, increasing their tax liabilities.

Under the previous Conservative government, income tax thresholds were frozen until 2028. Labour committed to not raising income tax and so accepted this extension, meaning the tax-free personal allowance will remain at £12,570 until then at least. This can impact your employees’ take home pay, with more people having to pay tax as salaries increase in the coming years. 

Less capital gains tax relief when selling business assets

Capital gains tax is a tax you pay when you sell something that’s increased in value. The tax is applied to the ‘gain’ made on the item(s), not the overall value. 

You might pay capital gains tax on all sorts of things - the list includes most personal possessions worth £6,000 or more (apart from your car), property that’s not your main home - though your main home might be included if you’ve let it out, used it for business or it’s very large - and any shares that are not in an ISA or PEP. 

You also need to pay capital gains tax on business assets - and this is something for small business owners to pay attention to because it’s heavily rumoured that Labour plans to increase capital gains tax. 

You already have to pay capital gains tax on business assets including land and buildings, fixtures and fittings, plant and machinery and shares to name a few things. But there are currently some tax relief measures in place for businesses. One such relief is called business asset disposal relief. 

Business asset disposal relief may allow you to pay less Capital Gains Tax when you sell all or part of your business or its assets. As it stands, you only pay tax at 10% on all gains on qualifying assets instead of the standard rates normally due. 

The government may be looking at tax relief for businesses in this area as the selling of businesses and its assets is a common trigger for capital gains tax. Any changes around the tax relief available is likely to have an impact on what small business owners decide to do with their business - especially when it comes to selling it on.

Much of this is speculation for now. But with the budget fast approaching the answers to many of the questions small businesses may have will, hopefully, soon be answered.