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Hello, everyone!
The 2024 Autumn Budget has been announced, and we're here to break down the most important points for you.
As usual, there's a lot to digest—so we'll be looking at it through the lens of the small business owner, distilling the key points as we see them.
While some changes may feel challenging, remember: you're resilient, and we're here to help you navigate these new waters 💪
Minimum Wage Rises
From 1st April 2025, minimum wage rates are increasing. Here are the changes:
The National Living Wage is rising by 77p (6.7%) to £12.21 per hour for those aged 21 and over
The 18-20 Year Old Rate is increasing by £1.40 (16.3%) to £10.00 per hour
The 16-17 Year Old and Apprentice Rate is going up by £1.15 (18%) to £7.55 per hour
Employer National Insurance Changes 💷
On top of the national minimum wage increase, the government announced changes to Employer National Insurance contributions.
Note that there are no changes to Employee National Insurance, so the net pay on your employees’ payslips won’t change as a result of any of the measures announced this week (all other things being equal).
Employer National Insurance Contributions are rising by 1.2 percentage points to 15%. Note this is an effective increase of 8.7% on your employer national insurance costs in £ terms.
Also, the National Insurance Primary Threshold - the wages that employees have to earn before employers begin to pay NI - will be lowered from £9,100 to £5,000.
Alongside those wage rises, you might be thinking this is a triple whammy!
But fear not, as there's a silver lining…
The Employment Allowance has increased from £5,000 to £10,500. This could potentially result in a reduction in NI costs for your business compared to what you’re currently paying.
How so?
For example, if your current annual employer's national insurance contributions are £8,000, assuming certain criteria are met, you'll currently receive an annual employment allowance of £5,000, leaving you with an employer's national insurance bill of £3,000 per year.
Under the new rates, the 1.2 percentage point uplift will result in extra costs of £696 per year. In addition, for each employee earning above £5,000 per year (£416 per month), you'll also have to pay additional national insurance costs of up to £4,100 * 15% = £615 extra per employee due to the reduction in the Primary Threshold from £9,100 to £5,000.
With a team of, say, 5 employees earning above £5,000 per year, that’s potentially an extra £3,075 per year (note this will be slightly less if some of those employees earn between £5,000 and £9,000).
In total then, that would mean total employer national insurance contributions of £8,000 + £696 + £3,075 = £11,771
However, because the employment allowance has increased from £5,000 to £10,500, your employer national insurance bill will actually be £11,171 - £10,500 = £671 which is a saving of £2,329 compared to the £3,000 you're currently paying.
We’ll be in touch soon to let you know how these changes will impact the National Insurance costs of your business from April 2025 🤙
Business Rates Relief 🏪
The current 75% discount on business rates is set to expire in April 2025.
It will be replaced by a discount of 40% (up to a maximum discount of £110k). This reduction in discount is equivalent to a 2.4x increase in what you're currently paying.
For example, if you're currently receiving the 75% rates relief and paying £1,000 per month, your new rates bill after a discount of 40% will be £2,400.
Additionally, the small business rates multiplier (the amount used to work out your business rates bill) will be frozen at 49.9p in 2025/26 and there's a plan to introduce permanently lower business rates for high-street retail, hospitality, and leisure properties from 2026-27 🙌
Capital Gains Tax Increases - with immediate effect! 📊
It was predicted that Capital Gains Tax, the tax you pay when you dispose of an asset such as an investment property or stocks & shares, would increase in this budget. It did, but not by as much as feared…
The lower rate of capital gains tax has increased from 10% to 18%
The higher rate of capital gains tax has increased from 20% to 24%
What if I'm selling my business?
The rate of Capital Gains Tax you pay when selling your business via Business Asset Disposal Relief will remain at 10% for now.
However, it will gradually increase to 14% from 6 April 2025 and 18% from 6 April 2026 📆
So if you are thinking about selling your business, you may be able to take advantage of a lower rate of tax if the sale completes in the current 2024/25 tax year
Fuel and Company Car Updates ⛽🚗
Company car tax rates have now been set until 2029/30.
It's still going to be much more tax-efficient to have an electric car, but not as much as before…
Fully electric cars currently receive a low BIK rate of 2%, but this will gradually rise by 1 percentage point each tax year until it reaches 9% in 2029/30.
Hybrid cars may become less appealing from a tax perspective, as their BIK rates will actually rise to 18% in 2028/29 (a hike of up to 13 percentage points depending on the car's CO2 emissions). The rate of 18% will be in line with the new company car BIK tax rates for petrol and diesel cars.
Wait, there’s more! From 6 April 2025, double-cab pickup trucks, previously treated as “commercial vehicles” will now be treated as cars for the purposes of BiK charges. Unfortunately, this will make personal use of a company-owned pickup truck more expensive from a tax perspective.
The good news is that double-can pick up trucks purchased before 6 April 2025 will continue to be treated as commercial vehicles until the earlier of disposal, lease expiry or April 2029. So if your company already owns a pick up truck that you also use personally, you won’t face any additional BiK charges for now…although the company will have to pay an extra £56.60 of Employer’s National Insurance on the benefit, in light of the 1.2 percentage point increase in the rate, as mentioned above.
Stamp Duty Changes 🏠
There's been an increase in stamp duty charges for second homes and buy-to-let properties.
Stamp duty is going up from 3% to 5% for those buying second homes, buy-to-let residential properties, and companies purchasing residential properties.
If the property is worth over £500,000 and being bought by a company, then stamp duty will rise to 17%, up from 15%.
Inheritance Tax Changes 🏦
Inheritance Tax thresholds have been frozen until April 2030 🧊
The government is also removing the opportunity for individuals to use pensions as a vehicle for inheritance tax planning by bringing unspent pension pots into the scope of inheritance tax from April 2027.
The government will reform agricultural property relief and business property relief from April 2026. In addition to existing nil-rate bands and exemptions, the 100% rate of relief will continue for the first £1 million of combined agricultural and business assets to help protect family farms and businesses, and will be 50% thereafter.
The government will also reduce the rate of business property relief to 50% in all circumstances for shares designated as "not listed" on the markets of a recognised stock exchange, such as AIM.
Tax Compliance Focus 🔍
The government is recruiting an additional 5,000 compliance staff - with the first 200 starting training in November, along with providing funding for 1,800 debt management staff. This will ensure more of the tax that is owed is paid and that more taxpayers pay outstanding tax due.
The government is also investing in modernising IT and data systems to improve HMRC's productivity and enhance taxpayers' experience of dealing with the tax system, delivering the modern and digital service businesses and individuals expect 👨💻
The government is also committed to taking stronger action on tax fraud, including expanding HMRC's criminal investigation work and legislating to prevent abuse in non-compliant umbrella companies 🕵️♀️
How we can work with you to respond to these changes:
While these changes may seem daunting, remember that we're here to help you adapt and thrive.
Here are just a few ways we'll help you respond to the changes announced in the Autumn Budget:
✅ We'll review each team member's wage rate, identify who needs a pay increase to comply with the national minimum wage changes and implement those from 6th April 2025
✅ As part of our 2025 forecasting exercise, we'll measure the impact of the wage increases, national insurance increases, and business rates increases on your expected profit for the year ahead. Then we can work with you to help manage the impact of these cost increases on your business's financial performance
✅ We’ll continue to ensure that you and your business are fully compliant with the latest HMRC rules and regulations
✅ And of course, we'll claim the £10,500 Employment Allowance on your behalf to minimise your Employer National Insurance bill—which might even leave you with no national insurance to pay at all!
If you're already working with us, we'll be in touch soon to discuss how these changes affect your specific situation and to plan your strategy moving forward. Together, we'll navigate this changing financial landscape! 🚀
Stay resilient, stay focused, and let's tackle these changes head-on! 💪🎯🎯
Rich, Luke and the team here at CloudCFO 👩👩👧👦
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