‍During the Autumn Budget 2024 today, Rachael Reeves made history as the first female Chancellor of the United Kingdom. 

Since her government took office in July 2024, they have reported a significant financial blackhole left by their predecessors. Reports claimed it could be as large as a £100 billion pound financial gap. 

As such, we were warned about how a ‘tough’ plan was needed to get the UK back on the right track. But what changes were announced to address the reported budget shortfall?

How will the Autumn Budget 2024 announcements impact individuals and businesses?

The Autumn Budget included a raft of changes affecting individuals (directors of personal service companies currently taking salaries up to £9,100 and those making their money through investments) and businesses to plug the financial blackhole. Some of the changes will take immediate effect while others will take effect from April 2025 and beyond.

National Insurance changes announced

The National Insurance freeze announced by the previous government will be maintained and employees will see no changes to their rates and thresholds (until April 2028 when it will rise in line with inflation). This means employees will not pay any national insurance on earnings below £12,570 per annum. The Lower Earnings Limit (threshold for earnings to count towards pensions) will be rising to £6,500 from 6 April 2025, up from the current £6,396.

Employers will however see three major changes to national insurance contributions including: 

• A change in the percentage rate that national insurance is paid, increasing it from 13.8% to 15% from 6 April 2025
• A drop in the secondary national insurance threshold at which employers start paying employers national insurance contributions from the current £9,100 to £5,000 commencing on 6 April 2025
• Increasing the Employment Allowance to £10,500 from the current £5,000 threshold while removing the current cap of £100,000

The self-employed will also see the Small Profits Threshold (profit level that indicates if class 2 national insurance is applicable) rise from £6,725 to £6,845 from 6 April 2025. The previous government made class 2 national insurance voluntary if profits were under the Small Profits Threshold. There is no indication of a reversal although the weekly rate will be rising from £3.45 to £3.50 from 6 April 2025.

Capital gains tax sees increase in rates

The government has increased the rates of capital gains on disposal of assets other than residential property made on or after 30 October 2024 to match that of residential property disposal as follows:

• Lower rate increased to 18% from the current 10%
• Higher rate increased to 24% from the current 20%
  

There are no changes to the rates for disposing of or selling your residential property.

For Business Asset Disposal Relief, previously known as Entrepreneurs Relief (relief you get when you close down your business), the rate is increasing to 14% from the current rate of 10% from 6 April 2025. From 6 April 2026, it will then rise to 18%. The lifetime limit will be maintained at £1 million.

Value Added Tax (VAT) updates

There will be no changes to the rates and thresholds but the charging of 20% VAT on private education comes into effect from 1 January 2025. The change impacts payments made on or after 29 July 2024.

Income tax promises kept in Autumn Budget

There will be no changes to the current rates and thresholds. However, the freeze announced by the previous government will not be extended. This means that from April 2028, thresholds will rise in line with inflation.

National Minimum and Living Wage increases

The National Minimum Wage and Living Wage is set to rise in April 2025 as below:

• £12.21 for those aged 21 and over
• £10 for 18 to 20 year olds
• £7.55 for 16 to 17 year olds and apprentices

Other important changes and announcements made in the Autumn Budget:

• Corporation Tax - no changes to corporation tax rates and thresholds, maintaining the Corporation tax cap at the 25% rate introduced by the last government.
• Benefits in kind - rates for van and car fuel benefits will be increasing from 6 April 2025.
• Stamp duty increase - the duty to acquire a second property is increasing from 3% to 5% from 31 October 24.
• Non-domiciled status - there will be the abolishing of the remittance basis for taxation from 6 April 2025.
• Annual investment allowances - no new changes have been announced meaning the allowance remains at £1 million.
• Business rates relief - Small business multiplier will also be frozen for the 2025/26 tax year, providing a 40% relief capped at £110,000. There will be a permanent lower business rates multiplier for those in retail, hospitality and leisure from 2026/27.
• Fuel duty - rates will be frozen for 2025/26 with the 5p cut now expiring on 22 March 2026.
• Business vehicles - Double cab pick up vehicles will be treated as cars from 1 April 2025 for corporation tax purposes and 6 April 2025 for income tax purposes
• Tax debts - Interest rates on tax debts will be increasing to encourage early payment

Key takeaways from the budget for SMEs:

The Autumn Budget 2024 introduces several impactful changes and initiatives aimed at bolstering the UK economy. 

Overall, while the budget might receive mixed reactions, it's crucial for small business owners to understand its implications for their operations and financial planning. 

It could significantly impact SMEs in the UK by:

1. Higher National Insurance costs: The increase in National Insurance contributions from 13.8% to 15% and the reduction of the secondary threshold will raise employment costs for SMEs, potentially affecting hiring and salary decisions.
2. Increased Employment Allowance: The rise in the Employment allowance to £10,500 provides some relief for small businesses, helping to offset the increased National Insurance costs and support job retention.
3. Capital Gains Tax impact: the increase in Capital Gains Tax rates to 18% and 24% could discourage investment and asset sales among SMEs, potentially impacting growth strategies and cash flow.
4. Stamp Duty on second properties: The rise in stamp duty for acquiring second properties to 5% may deter some small business owners from expanding their property portfolios. This in turn could affect long-term investment plans.
5. Fuel duty stability: The freeze on fuel duty rates will help SMEs manage transportation costs amidst rising operational expenses, providing some financial relief. 
6. Changes to Benefits in Kind: Increases in rates for van and car fuel benefits from 6th April 2025 may affect how SMEs manage their fleet and employee benefits, impacting overall costs. 

If you’re interested in learning more about how to boost your business finances then you’ll love our Crunch’s Knowledge base where we have free expert information on all things SME related.