The Autumn Budget 2024, presented by Chancellor Rachel Reeves, introduced several notable changes with substantial implications for small and medium sized enterprises (SMEs) and personal tax clients. Below, let’s break down the most critical updates and what they could mean for your business or personal finances.
1. National Insurance Contributions (NICs) Set to Rise
Starting in April 2025, Employer National Insurance Contributions will increase from 13.8% to 15%, and the NICs threshold will drop from £9,100 to £5,000. This change could significantly impact payroll costs, particularly for businesses with larger teams.
What This Means for SMEs:
- Higher Payroll Expenses: The NIC increase and lowered threshold mean higher contributions from employers, which will affect overall payroll costs.
- Relief via Employment Allowance: To help offset this impact, the Employment Allowance is set to rise from £5,000 to £10,500. This could provide vital relief for smaller businesses by reducing their total NIC obligations.
2. Capital Gains Tax (CGT) Adjustments
Effective immediately, the lower rate of Capital Gains Tax (CGT) will increase from 10% to 18%, while the higher rate will rise from 20% to 24%. In addition, the 2024 Autumn Budget states that Business Asset Disposal Relief (BADR) rates will rise to 14% by April 2025.
What This Means for Business Owners and Investors:
- Increased CGT on Business Sales: Those planning to sell business assets may face higher CGT obligations. If you’re considering a sale, now is a good time to consult with a tax professional to understand the long-term implications.
- Planning Opportunities: Individuals planning to dispose of assets may benefit from strategic planning to manage these increased rates effectively.
3. Inheritance Tax Revisions
From 2027, Inheritance Tax (IHT) will apply to unused pension funds passed on after death. Additionally, relief on agricultural and business properties will be capped, potentially impacting estate planning strategies.
What This Means for Individuals and Families:
- Estate Planning Impacts: This change could influence decisions around inheritance and business succession planning, especially for those in farming or property sectors.
- Additional Considerations: Families may need to reconsider their estate plans to address these changes effectively.
4. VAT on Private School Fees
Starting in January 2025, VAT will be applied to private school fees, which could increase financial pressure on families who have children in private education.
What This Means for Families:
- Increased Costs: Families may see a rise in educational expenses as a result of this new tax.
- Budget Planning: Those affected may wish to review their budgets and financial planning to manage the increased costs.
5. Business Rates and Reliefs
The government is extending a 40% business rates relief for the retail, hospitality, and leisure sectors through 2025/26, with a cap of £110,000 per business. Additionally, for properties over £500,000, rates relief will increase further in 2026/27.
What This Means for Businesses in These Sectors:
- Significant Savings Potential: This relief provides an opportunity for eligible businesses to lower their tax burden.
- Enhanced Support for Large Properties: The increased relief for high value properties aims to support growth for larger businesses within these industries.
6. Energy and Transport Levies
In a move to support businesses, the 2024 Autumn Budget confirmed fuel duty will remain frozen for another year. Additionally, new vehicle excise duty adjustments will favour zero-emission and hybrid vehicles, gradually introducing higher rates for traditional combustion engines.
What This Means for Businesses with Vehicle Fleets:
- Fuel Savings: Freezing fuel duty helps businesses manage operational costs, especially those reliant on transportation.
- Incentives for Green Vehicles: The shift toward prioritising zero emission and hybrid vehicles could encourage businesses to consider electric and hybrid options for their fleets.
7. Economic Outlook and Growth Projections
The Office for Budget Responsibility (OBR) projects GDP growth of 2% in 2025, generating optimism for a stronger economic environment. However, growth is expected to moderate after 2025.
What This Means for Businesses:
- Economic Optimism: The initial growth projection is a positive indicator for SMEs looking to expand.
- Long Term Planning: Growth moderation after 2025 means companies should focus on sustainable growth strategies and resilience planning.
How Nuvo Can Help You
Navigating tax changes can be complex, but Nuvo is here to help you make sense of these updates and strategise for the future. Whether you need advice on managing NIC increases, planning for a business sale, or adjusting to inheritance tax changes, our team is here to help!
If you have any questions about how the 2024 Autumn Budget affects your business or personal finances, we’re here to help!
You can contact us on [email protected] or call 01332 299 990 to speak with one of our friendly advisers.
