Labour’s first budget: the lowdown
The good, the bad and the ‘not as ugly as we expected’. How does the Autumn Budget impact your personal and business finances?
This was a budget aimed at putting more money into working people’s pockets...not necessarily the pockets of small business owners. But the speculation in the media was actually worse than what was announced, which we’re of course relieved about.
These are the key points of the Autumn Budget 2024 that we think could impact you.
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On the 29th Oct the government announced the following changes to the National Minimum Wage which will apply from the 1st April 2025:
National Living Wage (21 and over): up by 77p to £12.21 per hour
18-20 Year Old Rate: up by £1.40 to £10.00 per hour
16-17 Year Old and Apprentice Rate: up by £1.15 to £7.55 per hour
Employer National Insurance Contributions are now payable, from 6th April 2025, for employees with a salary over £5000
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From April 6th 2025 you will now pay Employer NICs on employee’s salary which is over £5000, and...
Employer NICs are going up from 13.8% to 15% goes here
However
Employment Allowance is increasing from £5000 to £10,500
Which means
There is a good chance that your Employer NIC bill may go down from the 6th April 2025
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Sadly you are not eligible for Employment Allowance
This means that if you take a salary of £12,570 per year, your Employers’ NI contributions will go up from £39.90 to £94.63 per month.
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Capital gains tax: lower rate increases from 10% to 18%, higher rate increases from 20 to 24%
Capital Gains Tax rates for Business Asset Disposal Relief, i.e. selling your business, and Investors’ Relief, i.e. investing in other businesses, will rise gradually to 14% from 6 April 2025 and match the main lower rate of 18% from 6 April 2026, to allow business owners time to adjust to the changes.
With the rise in Capital Gains Tax, it may be time to consider selling your business into an Employee Owned Trust which as long as certain conditions are met means your sale does not incur Capital Gains Tax.
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The 5p reduction in fuel duty is being extended for another year.
No changes to Corporation Tax, VAT or income tax rates or thresholds
More help for the retail, hospitality and leisure sector. Businesses in this sector from April 2025 will:
have their small business multiplier frozen for a year
benefit from 40% reduction in their business rates (it was a 75% reduction)
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HMRC is once again increasing its team to get more tax paid.
The government is recruiting an additional 5,000 compliance staff – with the first 200 starting training in November – and providing funding for 1,800 debt management staff.
The government is also committed to taking stronger action on tax fraud, including by expanding HMRC’s criminal investigation work and legislating to prevent abuse in non-compliant umbrella companies.
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Stamp duty for buyers increasing with immediate effect from 3 to 5%
Businesses buying properties over £500,000 are now liable for stamp duty of 17% (up from 15%)
Two key take-aways for your small business
1. You need to review your employees wages in line with the changes to National Minimum Wage
2. Paying yourself via dividends rather than PAYE is getting even less tax efficient
Actions you need to take now
Is your payroll software set up to administer the new National Insurance Contribution rates?
Get tax investigation insurance
With the National Minimum Wage rising on the 6th April 2025, who in your staff will need a pay rise?
Doing your personal tax planning has never been so important, i.e.
Decide on whether it would be better to pay yourself more via PAYE rather than PAYE and dividends? I.e. with changes to dividend tax credits and higher tax bands if your business is making over £50k in profit.
Would it make more sense to increase your payments to your pension? Particularly as you can now make £60k a year of contributions tax free.
Decide whether you'd be better off closing your limited company and trading as a sole trader.
If you haven't already model your cashflow and forecast your cost base for 2025