On Wednesday, 30 October, Chancellor Rachel Reeves set out the first Labour budget in 14 years and amongst weeks of speculation, gave clarity on the next steps for the economy. The Autumn 2024 Budget presents significant changes for businesses of all sizes across the UK, with the Chancellor increasing taxes by £40bn and borrowing to £127 bn for this tax year. The budget focus was to encourage growth for the UK and the Chancellor pledged a decade of ‘national renewal’ with increased funding for schools, housing and the NHS. Further spending announcements included infrastructure, transport, aerospace and automotive sectors.
With adjustments to employer National Insurance Contributions (NIC), an increased Employment Allowance and shifts in the minimum wage, the Budget marks a new fiscal direction. Below, we break down these changes and offer insights on how they might impact business owners. We then also ask the question on every entrepreneur’s mind: Is this truly a budget for growth?
Key changes for businesses
1. Employer National Insurance Contributions (NIC) and Employment Allowance Changes
One of the most prominent changes in the budget is the 1.2% increase in employer NICs, bringing the rate from 13.8% to 15% from April 2025. Additionally, the threshold at which NIC becomes payable is set to drop from £9,100 to £5,000. This will result in higher employment costs for employers, particularly those with large workforces, directly impacting payroll budgets.
To offset some of this burden for smaller employers, the Employment Allowance has been increased to £10,500, allowing more businesses to reduce their NIC liabilities. This adjustment is designed to aid smaller businesses but may still be a challenge for mid-sized and growing marketing creative agencies that don’t fully benefit from this allowance.
The team at CFO for Growth have drawn up a model to help our clients calculate the Employer’s National Insurance changes and impact. Please get in touch if you wish to find out more.
2. Capital Gains Tax (CGT) Adjustments
From October 30, 2024, CGT rates have increased from 10% to 18% at the lower rate and from 20% to 24% at the higher rate. This increase could be significant for marketing and creative agency owners planning to sell assets, especially for those utilising Business Asset Disposal Relief (BADR), which rises to 14% from April 2025.
While EIS, SEIS, and other venture capital schemes remain unchanged and extended to 2035, these CGT increases may dampen the attractiveness of the UK for investors and entrepreneurs, potentially slowing the growth of high-risk, high-reward sectors like tech and R&D.
3. Minimum Wage Increase
The national minimum wage will rise from £11.44 to £12.21 per hour in April 2025. While this will benefit employees in low-wage roles, employers are concerned about the combined impact of this increase with the NIC adjustments. Smaller firms, particularly in sectors like retail and hospitality, may feel the strain, with potential pressure to reduce headcount or limit expansion plans to offset rising labour costs.
4. Corporate Tax Roadmap and Reliefs
The Corporate Tax Roadmap offers continuity in some areas, capping the main corporate tax rate at 25% and retaining key reliefs such as R&D, capital allowances, and the Patent Box. Full expensing has also been retained, supporting business investment in machinery and other qualifying assets. This consistency in corporate taxation could provide some stability for long-term planning.
5. Abolition of Non-Dom Tax Regime
Starting in April 2025, the non-domicile tax status (eg: those whose main residence is outside of the UK) will be replaced with a residence-based system, requiring all UK residents to pay domestic taxes on global income. For international entrepreneurs and investors, this change may lessen the appeal of the UK as a tax-efficient base, potentially shifting the country’s attractiveness as a business hub.
6. Business Rates and Other Duties
High street retail, hospitality, and leisure sectors will continue to benefit from a 40% business rates relief in 2025-26, capped at £110,000 per business. Additionally, the alcohol duty on draught products is cut by 1p per pint, and fuel duty remains frozen, a positive note for sectors dependent on transportation and logistics.
However, duties on non-draught alcohol and soft drinks will increase, and a hike in the Energy Profits Levy from 35% to 38% means higher costs for businesses reliant on carbon-intensive processes. These changes point to an ongoing push towards sustainable practices, though they may impact profit margins for affected industries.
Key changes for individuals:
Some of the budget announcements that may impact our teams personally include:
- Capital Gains Tax has increased with immediate effect to 18% for basic tax rate payers and 24% for higher tax rate payers. CGT on residential property remains unchanged. These actions incentivise individuals to invest further in pensions and ISAs.
- The inheritance tax threshold remains at £235k (or £500k if it includes a residence left to a direct descendant), which has been extended to 2030.
- Confirmation that VAT will be added to private schools from Q1 2025.
- The government is committed to making tax digital for self-assessment, which may influence some of the freelancers in the creative sector, this is set to start in April 2026.
- HMRC has also announced an increase in additional HMRC compliance staff, modernising the debt IT systems and increasing late payment interest charged by HMRC on unpaid tax liabilities by 1.5%.
So, the key question – Is this a budget for growth?
While some of the measures that have been put in place, such as NIC allowances for small businesses and stability in corporate tax, might support business operations, the overarching effect seems less growth-oriented. The increases in employment costs, CGT, and minimum wage could dissuade investment and recruitment, particularly for high-growth sectors where cash flow is critical for scaling operations.
Furthermore, the higher tax burdens on disposals and investments and a shift in the non-domicile status may reduce the UK’s appeal to foreign investors and entrepreneurs.
Looking Ahead: Key Risks for Business Owners
- Pressure on hiring and wage management: With higher NIC rates and minimum wage, businesses might need to re-evaluate staffing levels or restructure pay scales to stay profitable. This is particularly challenging for sectors with slim profit margins, where the extra costs could lead to job cuts or deferred hiring.
- Investment Climate: The increase in CGT and the abolition of the non-dom regime raise concerns about the UK’s competitiveness on the global stage. Without a balanced approach, these policies may stifle entrepreneurship and discourage foreign investment, ultimately impacting the innovation landscape in the UK.
Final thoughts
The Autumn 2024 Budget brings a mix of measures that focus on immediate fiscal needs rather than fostering a clear, longer-term growth path. For businesses, particularly SMEs, the increased costs may demand tighter budget management and a careful review of hiring practices, investment strategies, and compliance obligations.
The question remains: can businesses thrive under these conditions, or will these policies inhibit the growth the economy needs?
