Autumn Budget 2024: Key Impacts for Small Businesses in the UK

Autumn Budget 2024: Key Impacts for Small Businesses in the UK

The UK’s Autumn Budget 2024 includes updates designed to generate more government revenue and support workers, but it has notable impacts for small businesses, especially in terms of payroll costs and tax obligations. Here’s a breakdown of the changes and what they mean for small business owners, with the exact figures.

Employer National Insurance Contributions

The new budget raises Employer National Insurance (NI) contributions by 1.2 percentage points, from 13.8% to 15%. Additionally, the NI threshold, currently £9,100, will drop to £5,000 from April 2025. These combined changes will increase the amount small businesses must pay per employee.

• Current Cost: For a £30,000 annual salary, businesses currently pay around £2,418 in NI.

• New Cost: With the increase to 15% and the lowered threshold, this NI contribution will rise to approximately £3,000 per employee, meaning an extra £582 per employee annually.

However, the Employment Allowance for small businesses will increase from £5,000 to £10,500, effectively exempting the smallest businesses from NI. This relief will cover NI contributions up to the allowance, helping to mitigate some of these additional costs for microbusinesses.

National Living Wage Increase

From April 2025, the National Living Wage will increase by 6.7%, bringing the hourly rate from £11.40 to £12.21. This increase translates to an additional £1,400 annually for full-time employees working 40 hours per week.

This rise benefits workers but presents added payroll costs for small business employers, particularly those in sectors like hospitality, retail, and care. For example:

• Current Cost: For an employee working 40 hours weekly at £11.40 per hour, the annual wage cost is around £23,712.

• New Cost: At £12.21 per hour, this becomes £25,396 annually, an increase of £1,684 per employee each year.

Capital Gains Tax (CGT) Changes

The budget increases Capital Gains Tax (CGT) rates, which affect small business owners selling assets. The lower rate rises from 10% to 18%, while the higher rate increases from 20% to 24%.

Example Impact: On the sale of a £100,000 business asset with a gain of £50,000:

• Current CGT: 10% rate on the gain = £5,000 owed.

• New CGT: 18% rate = £9,000 owed, an increase of £4,000 in taxes on the same gain.

For business owners planning to sell assets, this increase could mean a need to re-evaluate the timing or tax strategy around asset sales.

Business Rates Relief for High Street Businesses

In support of high-street businesses, the budget offers a 40% business rates relief for qualifying retail, hospitality, and leisure properties. This relief, capped at £110,000 per business, is intended to help small businesses offset property tax expenses and encourages the survival of brick-and-mortar locations.

For instance, a small retail shop currently paying £5,000 annually in business rates could see its rates reduced to £3,000 under this relief, saving £2,000.

Fuel Duty Freeze

The fuel duty freeze will continue for another year, along with a 5p cut per litre. For small businesses reliant on transportation, like delivery or mobile service-based businesses, this freeze keeps operating costs steady amid rising expenses in other areas.

• Current Cost: A van consuming 20,000 liters of fuel per year would currently incur around £11,200 in fuel duty.

• Savings with Freeze: With the 5p cut, this results in £1,000 in annual savings on fuel costs, helping to keep transport expenses in check for businesses with regular travel needs.

Draft Duty Reduction for Hospitality

A smaller, but valuable, adjustment in the budget is a 1.7% reduction in draft duty on alcoholic beverages for pubs and bars. This modest cut could help small hospitality venues maintain profitability or offer slight price advantages to attract customers.

For example, a bar selling draft beer at £5 per pint might save 8.5p per pint sold, which can add up across hundreds or thousands of sales, especially during busy seasons.

Summary for Small Businesses

These changes from the Autumn Budget 2024 carry both costs and opportunities for small businesses. While increased NI contributions and wage expenses may strain budgets, targeted relief like the Employment Allowance increase and business rates cuts help ease some pressures. For small business owners, preparing financially for these shifts will be essential to maintaining profitability in the coming years.