Chancellor Rachel Reeves has introduced Labour’s first Budget in over a decade, with announcements ranging from tax, wages, and government spending.

If you run a small or medium-sized business, here’s a summary of key points to help you understand what these changes mean for you and your team.

Personal and business taxes

• National Insurance Changes: From April, businesses will face increased National Insurance contributions on earnings over £5,000 (currently £9,100), with the rate rising from 13.8% to 15%. This adjustment could affect your payroll costs, so planning ahead for this added financial commitment may help mitigate the impact.
  
  
• Employment Allowance Boost: The Employment Allowance, which allows businesses to offset some of their National Insurance liabilities, is set to increase from £5,000 to £10,500. This increase can help reduce costs for eligible employers, especially smaller businesses needing additional relief.
  
  
• Capital Gains Tax Increase: Capital gains tax (CGT) rates on non-property sales are set to increase from 10% to 18% for basic-rate taxpayers and from 20% to 24% for higher-rate taxpayers. This measure may have an impact if your business relies on investment or property holdings, especially in portfolio assets or if you’re planning to sell off shares.
  
  
• Corporation Tax Rate Steady: For businesses making profits over £250,000, the corporation tax rate will remain at 25% until the next election. This consistency can aid in planning, though businesses below this threshold will see tapered relief on lower profits.
  
  

Employee wages and benefits

• Minimum Wage Increases: From April, the National Living Wage for employees aged 21 and over will rise from £11.44 to £12.21 per hour, and for those aged 18–20, the rate will go up from £8.60 to £10. This is part of a broader goal to establish a single adult rate, impacting payroll costs for businesses with lower-paid staff. While beneficial for employees, small businesses may need to evaluate budget impacts, particularly for entry-level or junior roles.
  
  
• Increased Apprentice Rate: For those under 19 or in the first year of an apprenticeship, the minimum wage will increase from £6.40 to £7.55 per hour, which may also affect businesses with entry-level or apprenticeship programmes.
  
  
• Employee Benefits and State Pensions: While state pensions and some benefits will see modest increases, employees on universal credit may benefit from higher allowances, which could lessen their need for additional wage support. For employees who are also carers, the allowance threshold has increased, meaning they can earn more before affecting their eligibility.
  
  

Transport and travel

• Changes to Bus Fare Cap and Fuel Duty: Starting in January 2025, the cap on single bus fares across England will increase to £3. Additionally, the 5p reduction in fuel duty on petrol and diesel will remain in place for another year, which could help businesses reliant on road transport to contain travel costs.
  
  
• Increase in Air Passenger Duty for Private Jets: If you’re part of an industry where private or business jet travel is frequent, note that the Air Passenger Duty will rise by 50%. This could impact any high-profile travel plans or events requiring private aviation, an increasingly scrutinised expense.
  
  

Housing and property

• Stamp Duty Surcharge Increase: For those acquiring second properties, such as additional business premises or investment properties, the stamp duty surcharge in England and Northern Ireland will rise from 3% to 5%. This change may necessitate budget adjustments for future property investments.
  
  
• Inheritance Tax and CGT Implications: Although inheritance tax (IHT) remains at 40%, pension savings inherited from April 2027 will be included in taxable estates, potentially increasing IHT liabilities. Business owners considering succession planning should keep this in mind, as it may alter financial planning around passing on business interests or assets.
  
  

Economic growth, inflation, and government spending

• Growth and Inflation Forecasts: The Office for Budget Responsibility predicts modest growth of 1.1% this year, increasing to 2% next year, with inflation expected to average 2.5% this year. Knowing these projections can help you gauge pricing adjustments and long-term planning for product or service pricing as inflation pressures ease.
  
  
• Education and Healthcare Funding: With £6.7bn allocated to education and £22.6bn to the NHS, this spending could impact sectors tied to public procurement or healthcare. If your business operates within these areas, you may see additional opportunities or increased demand.
  
  

This Budget introduces several measures aimed at balancing tax income with increased spending in public services and wage increases. The overall impact on small and medium-sized businesses will depend on your particular circumstances, including your workforce size, profit margins, and investment strategies.

How can we help?

If you’re unsure how these changes could impact your business or if you have a specific question in mind, feel free to reach out to our team on 01904 787 973 or book a call with Donald Inglis. The Autumn Budget also introduced adjustments to benefits, state pensions, taxes on tobacco and alcohol, and VAT on private school fees. If you think these issues directly affect your business then please get in touch.