How will the changes in the Autumn Budget affect businesses?
The tax changes announced in the Autumn Budget on 30 October 2024 by Rachel Reeves will have a significant effect on both our business and individual clients. This Budget has been the largest tax raising budget since 1993. Whilst we are not tax experts, in the article below we set out how these changes might affect your business and some of the issues our clients may encounter.
- Increase in Employer National Insurance Contributions (NICs)
Although there has been no increase in NICs for employees, NICs for employers will increase from 13.8% to 15% from 24 April 2025 alongside a reduction in the threshold at which employers begin paying NICs from £9,100 per annum to £5,000.
To shield smaller employers from these costs, the employment allowance will increase from £5,000 to £10,500 per year; since the £100,000 threshold will be removed, it will now apply to all businesses. The Chancellor believes that small businesses will pay either the same or less NICs. The Office of Budget Responsibility anticipates a significant amount of these tax costs will be passed on to employees through lower wages and to consumers by higher prices.
These NICs costs implications for businesses will be coupled with an increase in both the minimum wage (which will rise to £12.21 per hour in April 2025) and business rates. Furthermore, businesses need to evaluate the effect the Employment Rights Bill introduced on 10 October 2024 (which my colleague, Jolyon Berry, has previously discussed in his recent article here) will have for them since the changes envisaged pave the way for the most radical changes to employment law since the 1970’s.
- Capital Gains Tax (CGT)
CGT is to rise from 10% to 18% for non and basic rate taxpayers and from 20% to 24% for higher and additional rate taxpayers. The £1m Business Asset Relief and Investor’s Relief are to be retained but will increase to 14% from April 2025. CGT on residential properties are to remain unchanged. There was widespread speculation that CGT rates were to be significantly increased and/or existing reliefs greatly reduced. Whilst businesses may breathe a sigh of relief that these predictions did not come to fruition, and instead the changes to the CGT regime have been more modest, it is still advisable for individuals thinking of exiting their business to start planning and take tax advice since certain of the changes take effect immediately whilst others are to be phased in over time. Please contact Caroline Nicholls in our corporate and commercial team for further advice.
- Inheritance Tax (IHT)
From 6 April 2026, the existing 100% rates for Agricultural Property Relief (APR) and Business Property Relief (BPR) will only continue for the first £1m of combined agricultural and business property. Property in excess of this limit will benefit from 50% relief meaning an effective 20% IHT charge. To ensure allowances are maximised, a review of estate planning and wills is advisable in the next 18 months especially due to the lack of transferability of allowances between spouses/civil partners. These changes have major tax implications for family businesses, estates and trusts and it is essential to start succession planning as soon as possible and to review gifts of APR or BPR assets which may have already been made under a will. Please contact Ann Coutts in our Wills and Estates team for advice on tax planning.
If you would like to discuss how the changes announced in the Autumn Budget may affect either yourself or your business then please get in touch as now is the time to reflect on these changes and see if your current liability can be mitigated.