What does the 2024 budget mean for your small business?

Rumours and speculation seemed to be in overdrive ahead of the autumn budget. With suggestions of tax rises and spending cuts, it felt like expectations were being managed ahead of a painful set of announcements.

And on October 30, 2024, the autumn budget was announced. Chancellor Rachel Reeves set out her seven main priorities as follows: 

1 - Restore economic stability

2 - Increase investments and build new infrastructure

3 - Ensure all parts of the UK can realise their potential

4 - Improve employment prospects and skills

5 - Launch long term modern industrial strategy - expanding opportunities for SMEs to grow

6 - Drive innovation and protect record funding for research and development

7 - Maximise the growth benefits of clean energy

As the announcements were made, some rumours turned out to be true, others not. 

Manifesto promises around there being no rise to income tax, VAT or employee National Insurance were confirmed. In fact, from 2028/29 income tax thresholds will be uprated in line with inflation again - lifting the previous government’s freeze. The heavily rumoured increase of the minimum wage to £12.21 was also confirmed. 

But what was said about small businesses? Let’s cut through the noise and confirm exactly what was announced that may impact your small business. 

A rise to employers’ National Insurance

Rumoured before the announcement, a rise to the amount employers need to pay in National Insurance (NI) turned out to be true. 

From April 2025, employers will pay 15% in National Insurance on their employees, a rise of 1.2 percentage points. 

There is also a reduction in the secondary threshold for when employers must pay this - decreasing from £9,100 to £5,000. 

To help support smaller businesses with this rise, Reeves announced an increase in the employment allowance - extending the amount employers can claim back from their National Insurance bill from £5,000 to £10,500. 

The chancellor confirmed this means some 865,000 employers won’t pay any National Insurance on their employees next year and around 1 million will pay the same as they have previously or less. 

Capital gains tax increase

Capital gains tax will see thresholds increase next year, with the lower rate rising from 10% to 18% and the higher rate rising from 20% to 24%. 

SMEs currently have access to business asset disposal relief and it was rumoured this might be removed. That turned out not to be the case as Reeves announced the relief available on the sale of business assets will remain at 10% this year, rising to 14% in April 2025 and 18% in 2026/27.

So while the relief rates will increase this parliament, they will maintain a significant gap compared to the general capital gains thresholds.

Permanent relief on business rates

To help high street businesses, Rachel Reeves announced permanent lower business tax rates for retail, hospitality and leisure businesses. 

The current 75% discount to business rates is due to expire in April 2025. It will be replaced by a permanent discount of 40%, up to a maximum of £110k per business. This will be paid for by a higher multiplier on the most valuable properties.

It was also announced that the small business tax multiplier will be frozen next year.

Corporate tax roadmap unveiled

The budget confirmed the government’s commitment to cap corporation tax at 25% for the duration of this parliament. This makes the UK’s corporation tax rate the lowest in the G7. 

More freezes and cuts

Here’s a roundup of some of the other announcements that may impact your business: 

• Fuel duty is frozen for another year

• From April 2026, the first  £1m of combined business and agricultural assets will not incur inheritance tax

• Alcohol duty for off-draught alcohol will increase in line with the retail prices index (RPI), while draught rates will be cut by 1.7% which is about 1p off the pint

• The current rates of R&D relief will remain in place

4 proactive tips for SMEs following the budget announcements

Rachel Reeves and the Labour government reiterated their pledge to work with entrepreneurs and venture capital firms to ensure policies support a positive environment for entrepreneurship in the UK. 

Some of the announcements may impact more businesses than others, so here are four things you can do to help navigate potentially challenging times ahead:

1. Understand how the announcements will affect you

It can sometimes be difficult to read past headlines and know how various announcements will impact your business directly. Take the time to digest the news and work out how you might be personally affected. For example, the National Insurance rise may sound alarming, but if you have fewer than five members of full time staff on the national living wage, you won’t pay any NI.

2. Take advantage of relief now

If you’re thinking about selling business assets, it might be worth acting sooner rather than later. Business asset disposal relief will remain at 10% until April 2025, before it increases to 14%. 

3. Prepare for new business rates

With the introduction of new permanent business rate discounts of 40% set to replace the current temporary 75% discount when it expires next year, it's essential to reevaluate your financial plans. Adjust your budgets accordingly and consider price increases where needed to offset these changes. Be sure to communicate any adjustments to your customers, so they understand the reasons behind potential price hikes. You can use the government’s table here to help work out what rates you’ll pay. 

4. Explore R&D relief

As research and development relief will remain in place, consider allocating resources to innovate your products or services. This could enhance competitiveness and potentially open up new revenue streams.