Key Impacts of the 2024 Autumn Budget on Small Businesses In Rugby and Warwickshire

Chancellor Rachel Reeves' 2024 Autumn Budget introduces several changes set to impact small businesses across the UK. Understanding these key changes is essential for business owners to plan effectively and make informed financial decisions.

1. Increase in Employers' National Insurance Contributions (NICs) and Employment Allowance

From April 2025, the rate of Employers' NICs will rise by 1.2%, bringing it to 15%, alongside a reduction in the threshold at which employers start paying NICs, from £9,100 to £5,000. This increase is aimed at bolstering public finances but inevitably raises employment costs for businesses. However, the government has counterbalanced this change with an increase in the Employment Allowance, now allowing businesses to offset £6,000 annually against their NIC liabilities, up from £5,000.

Implications for Small Businesses:

• Higher Employment Costs: The increased NIC rate means employers will face higher costs per employee, potentially impacting hiring plans, wage levels, and profit margins.
• Offset with Employment Allowance: The raised Employment Allowance will provide some relief, particularly for small businesses that may now be able to offset a larger portion of their NIC liabilities. However, for businesses with larger payrolls, this offset may only partially cushion the impact.
• Financial Planning Adjustments: Small businesses should reassess budgets, forecast employment costs, and factor in both the NIC increase and the higher Employment Allowance to maintain a balanced financial plan.

2. National Minimum Wage Increase

The National Minimum Wage will increase by 6.7% to £12.21 per hour for workers aged 21 and over, effective from April 2025. Wages for 18-20-year-olds will increase to £10 per hour, and the apprentice rate will rise to £7.55 per hour.

Implications for Small Businesses:

• Increased Payroll Expenses: Businesses that employ minimum wage workers will experience a higher wage bill, necessitating adjustments in payroll budgets.
• Pricing and Cost Strategies: To manage these added payroll expenses, businesses might consider revising their pricing models or optimising operational costs, though such changes could impact competitiveness.

3. Business Rates Relief Adjustment

To support high street businesses, the government has introduced a 40% relief on business rates for the retail, hospitality, and leisure sectors, capped at £110,000 per business. Additionally, the small business tax multiplier will be frozen at 49.9p.

Implications for Small Businesses:

• Reduced Overheads for Eligible Businesses: Small businesses in qualifying sectors can benefit from reduced rates, easing overhead pressures.
• Review of Eligibility: Businesses should confirm their eligibility for relief and submit claims to maximise savings.

4. Capital Gains Tax (CGT) Increase

The lower rate of Capital Gains Tax will increase from 10% to 18%, and the higher rate from 20% to 24%. However, the rates for property sales remain unchanged.

Implications for Small Businesses:

• Impact on Asset Disposal: Businesses planning to sell assets may face higher tax liabilities, which could influence asset management and investment strategies.
• Strategic Planning: Reviewing the timing of asset sales and evaluating the tax implications will be essential for tax-efficient asset management.

5. Fuel Duty Freeze

The government has extended the freeze on fuel duty for another year, maintaining the temporary 5p per litre cut introduced in March 2022.

Implications for Small Businesses:

• Reduced Transportation Costs: Businesses with transport-heavy operations benefit from the continued relief on fuel costs, which helps manage overall expenses.
• Budget Certainty: The freeze allows for more predictable fuel budgeting, aiding in accurate financial planning.

Conclusion

The 2024 Autumn Budget introduces measures that both challenge and benefit small businesses. While increased NIC rates, wage hikes, and CGT changes may put pressure on finances, the raised Employment Allowance, business rates relief, and fuel duty freeze offer welcome support. Proactive planning and budgeting will be essential for small businesses to manage these adjustments effectively.

For tailored guidance on how these budget changes may impact your business, Redwood Accountants (Rugby) is here to help. Feel free to get in touch for more information on navigating these developments and maximising your business’s financial resilience.