Business rates, National Insurance, minimum wage increases… small business owners might have had a hard time keeping up with this Labour government’s first budget – and not just because they were hiding behind the sofa while it was being announced.
Ever since Labour’s election victory back in July, sole traders, business owners and side-hustlers have been desperate to know what the change of government might mean for small businesses and the self-employed.
Business confidence was already sputtering after a series of dour warnings about the poor state of the country’s public finances and the discovery of a so-called “black hole” on the government’s ledger, followed by weeks of frenzied speculation about which taxes might be increased or tweaked in the budget.
So when the Chancellor, Rachel Reeves, took to the dispatch box on Wednesday lunchtime, it was against the backdrop of a great deal of anxiety for the UK’s hard-working small business owners and side-hustlers.
Now, at last, we finally know more about the government’s financial agenda, including hot-off-the-press plans to hike taxes by £40 billion.
Here’s everything you need to know about how the 2024 Autumn Budget could affect you and your small business.
Employer National Insurance Contributions
If your business employs anyone, then this announcement might have been the most painful of all the measures to have emerged from Rachel Reeves’ red box.
Before the budget, the Chancellor had been widely expected to announce an increase in employer National Insurance Contributions (NICs). In this regard, she delivered: announcing an increase of 1.2 percentage points to bring employer NICs up to 15% from 6 April 2025.
In asking employers to “contribute more”, Reeves also announced a reduction in the secondary threshold – the level at which companies start to pay NICs on an employee’s salary – from £9,100 per year to just £5,000 per year.
Economists have warned that this move could lead to reduced hiring and smaller pay rises, and in the immediate aftermath of the budget, many businesses responded with concern.
Commenting on the budget, Tom Minnikin, partner at Manchester tax consultancy Forbes Dawson, said in email to NerdWallet: “Reducing the secondary threshold was a surprise move. This means employers will have to pay an additional £615 in National Insurance for every employee who earns £9,100 or above.
“These changes amount to a tax on jobs and may lead businesses to re-evaluate their expansion plans in light of the decision.”
In a bid to allay some employers’ fears, Reeves did also announce a change to the employment allowance, which allows eligible employers to reduce their annual National Insurance liability.
The allowance previously stood at £5,000, but it is now set to rise to £10,500, which the government says will result in over 865,000 small businesses being exempt from paying employer NICs.
Minimum wage
In a bid to ease the cost of living for lower-paid workers, Reeves announced an above-inflation increase to the UK Minimum Wage.
But if you are an employer, then this change – especially when taken with the increase to employers’ NICs – could have you fearing major ramifications for your bottom line.
From April 2025, the National Living Wage (which applies to any worker aged 21 and over) will increase from £11.44 to £12.21 an hour, representing a 6.7% increase and a pre-tax pay rise worth £1,400 a year.
The National Minimum Wage (which must be paid to 18- to 20-year-olds) will also rise: from £8.60 to £10 an hour. The government says this is the first step towards aligning minimum wages for all adults – something employers should expect in the coming years.
While these measures may be good news for some workers, there will be concerns among businesses about the rising cost of employing people – potentially forcing some business owners to make difficult choices about how much of a pay hike they can afford.
Dariusz Karpowicz, director at Albion Financial Advice, raised concerns about how these proposed increases will affect smaller businesses.
He said: “While the goal of boosting worker incomes is admirable, such a significant hike could strain employers, making it more difficult to maintain operations and expand. Larger corporations may be able to absorb the added labour costs, but smaller firms may struggle to find the necessary flexibility.”
Business rates
Before the election, Labour had already pledged to overhaul the current system of business rates in the hope of resuscitating struggling high-street businesses and ensuring that tech giants pay their “fair share” of tax.
As it stands, the “rateable value” of a business is based on how much annual rent could be charged on business premises. This figure is multiplied by either a standard or small-business multiplier to determine a firm’s actual business rates bill.
As part of the budget, Reeves announced that from the 2026/2027 tax year, the government will introduce two permanently lower business rates for retail, hospitality and leisure properties. She added that this change will be offset by a higher multiplier for the most valuable properties.
Firms in the retail, hospitality and leisure sectors in England and Wales currently benefit from 75% rate relief, worth up to a cap of £110,000 annually per business. However, this is only a temporary measure which was due to expire next year.
To bridge the gap until rate reforms are implemented, Reeves pledged to extend business rate relief for firms in these sectors – albeit at a lower level of 40%, up to the same cap of £110,000 per business.
Reeves also announced a freeze to the small business tax multiplier, which is used to determine rates for business properties with a rateable value below £51,000.
Bear in mind that business rates are devolved to Wales, Scotland, and Northern Ireland, so the changes announced in today’s budget won’t necessarily affect all of the UK in the same way.
Corporation Tax
One of the Chancellor’s key pitches to business owners and entrepreneurs was that this government would provide economic stability and certainty, which is why the government will publish a “Corporate Tax Roadmap”.
The roadmap will confirm what Rachel Reeves promised at the dispatch box: that Corporation Tax (the tax which is paid on company profits) will be capped at 25% – the current rate – for the duration of this parliament.
As the Chancellor stated during the budget, the UK’s Corporation Tax rate is currently the lowest in the G7 group of advanced nations.
Reeves has also previously said that the government would act if the competitiveness of this tax came under threat, meaning future reductions in Corporation Tax are theoretically possible during this parliament.
Companies with profits of less than £50,000 pay a lower small profits rate of Corporation Tax, which currently stands at 19%.
And for businesses with profits under £250,000, marginal relief for Corporation Tax provides a gradual increase in Corporation Tax rates between the small profits rate and the main rate, which reduces the tax bill for many businesses.
It will come as a relief to many business owners, then, that the Corporate Tax Roadmap also includes a commitment to maintain the small profits rate at 19% and to maintain this marginal relief.
Full expensing and capital allowances
As part of the Corporate Tax Roadmap, the government has also committed to maintaining full expensing, which allows companies to write off the cost of investment with tax cuts worth 25p for every pound a UK business invests.
Similarly, the annual investment allowance will be maintained at £1 million. This means businesses can deduct up to £1 million in permissible plant and machinery costs from their pre-tax profits, again saving businesses money on their Corporation Tax bill.
Research and development relief rates are also being preserved, as is the patent box – which allows companies to pay a lower rate of 10% Corporation Tax on profits earned from the use of their own patented inventions.
Capital Gains Tax and Business Asset Disposal Relief
As part of a raft of tax rises to balance the national books and fund state spending, Reeves announced an increase to the rate of Capital Gains Tax (CGT) – which is paid on profits made from disposing of assets which have increased in value.
The lower rate of CGT (which is paid by standard-rate taxpayers) will rise from 10% to 18% while the higher rate of CGT will rise from 20% to 24% from 30 October 2024.
Some business owners will have been listening out for changes to CGT because this is the tax that may be triggered when you sell your own business.
Business Asset Disposal Relief exists to offset these costs for entrepreneurs. Thanks to this relief, if you sell your own business, you currently only have to pay CGT at a rate of 10% on qualifying capital gains. You can claim up to £1 million in Business Asset Disposal relief over the course of your lifetime.
While the budget left the lifetime £1 million relief limit intact, Reeves did announce reductions in the rates of relief available to people selling their own business.
Business Asset Disposal Relief will stay at 10% for now, but in April 2025 it will rise to 14%, before rising to 18% in 2026.
Business inheritance tax
If you are planning to pass on your business after you die, then you could be affected by the government’s planned reforms to agricultural property relief and business property relief.
From April 2026, only the first £1 million of combined agricultural and business assets you pass on will benefit from 100% inheritance tax relief (in addition to existing nil-rate bands and exemptions). After that, any inheritance tax relief will drop to 50%.
This is a change which has already sparked concern among some small business owners – particularly those in the farming sector.
Neil Davy, chief executive officer of Family Business UK, a not-for-profit body that campaigns for family businesses, described these changes as “a betrayal of Britain’s hard working family business owners and farmers that will result in valuable businesses being closed, sold and jobs lost across the country”.
He added: “On top of changes to Employer’s National Insurance, employment rights and living wage, this is yet another burden heaped on Britain’s 4.8 million family-owned businesses and removes entirely any incentive for starting or running a family business.”
Fuel Duty freeze
If you use a vehicle for your business or spend a lot of time on the road, you might have been listening keenly for any announcement on fuel duty.
Fuel duty – the tax you pay to fill your car or van at the pumps – has been frozen since the 2011-2012 tax year and is currently subject to a temporary 5p-per-litre cut.
There was some speculation before the budget that Reeves could be about to unfreeze the duty, remove the cut, and increase it in line with inflation – potentially adding as much as 7p per litre at the pumps.
Thankfully for drivers, however, the chancellor ultimately decided to leave the handbrake untouched, meaning fuel duty will remain at its current level for another year.
Stamp Duty
Stamp Duty Land Tax (the tax you pay when buying a property worth over a certain threshold) has a surcharge for additional dwellings – meaning you’ll pay more Stamp Duty on any property which isn’t going to be your primary residence.
In a move which could affect buy-to-let landlords, Reeves announced an increase in the Higher Rates for Additional Dwellings (HRAD) surcharge from 3% to 5%, effective from 31 October 2024.
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