Autumn Budget 2024: what it means for small businesses

On 30 October, Chancellor Rachel Reeves delivered her first Autumn Budget, which she said pledged to “invest, invest, invest” to drive economic growth and boost living standards. 

She highlighted a £22 billion “black hole” in public finances inherited from the previous government, vowing to fill it with measures that would, in her words, “restore stability to public finances and rebuild our public services.”

Although Reeves had ruled out tax increases for what she described as “working people” (covering income tax, VAT, and employee national insurance), taxes have been raised overall by £40bn. Some of these tax adjustments directly impact small business owners.

Here, we’ve summarised the top changes likely to affect your business, to help you stay informed and prepared for what’s ahead.

1. National Insurance Contributions for Employers

While employee National Insurance Contributions (NICs) remain unchanged, the Chancellor has announced a 1.2% increase in employer NICs, raising the figure to 15% starting in April 2025. The NIC threshold for employer contributions has also been lowered, now applying to employees earning above £5,000 instead of the previous £9,100. 

To reduce some of the strain on small businesses, the employment allowance for those with NIC bills under £100,000 has been increased from £5,000 to £10,500. Factoring in these changes now can help you adjust your budget for upcoming payroll expenses.

2. Capital Gains Tax increase

The Chancellor announced an increase in Capital Gains Tax (CGT) rates, which will impact small business owners who plan to sell or transfer business assets. The lower CGT rate will rise from 10% to 18%, while the higher rate increases from 20% to 24%. 

These new rates apply to profits made on the sale of assets such as buildings, equipment, and shares. If you’re considering selling assets to reinvest in other areas, it would be good to account for this increased tax rate in your planning, to avoid unexpected costs.

3. Inheritance Tax changes

For those planning to pass on business assets, inheritance tax rules have been tightened. Assets over £1 million that were previously exempt from Inheritance Tax will now receive a 50% relief. These updated tax rules mean a 20% tax rate now could apply. 

This change will also apply to shares on the Alternative Investment Market (AIM), impacting small businesses looking to transfer ownership to the next generation. If succession planning is on your agenda, it may be worth speaking with a financial advisor to understand how these changes will impact your future plans.

4. Business rates reforms

Changes to business rates will impact high street retail, hospitality, and leisure businesses in particular. The existing relief for these sectors will decrease from 75% to 40%, which will likely increase costs for small businesses with brick-and-mortar locations. 

The government also plans to consult on potential long-term reforms to business rates, which may provide new insights into future costs for physical locations. This means that if your business relies on foot traffic, it’s worth budgeting for these changes as you look to 2025 and beyond.

5. National Minimum Wage

The government has also raised the National Living Wage to £12.21 per hour from April 2025, with the National Minimum Wage for 18-20 year olds set to increase to £10.00 per hour. The aim is to unify these rates over time, bridging the gap between different age groups. 

For small businesses with employees across varying wage brackets, these increases are important to consider as you plan for staffing budgets and operational expenses in the upcoming year.

Wrapping up

As a small business owner, we know changes such as these can take some time to get used to. We hope this summary has provided a little extra clarity on how your business may be affected.

Here at Tide, we’ll continue to advocate for you and challenge the government to do more to encourage entrepreneurialism and growth. Read our CEO Oliver’s open letter on the changes he would like to see to support small businesses and promote long-term economic growth.