With the release of the Autumn Budget 2024, the UK sees its first Labour budget since 2010. This budget, introduced by Chancellor Rachel Reeves, plans to address the nation’s economic issues, focusing on stability and reforms necessary for future growth. At bk plus, we are closely examining how these policies will affect local businesses and the ongoing vitality of community enterprises.

This article will break down the key components of the budget and their implications for the future…

Business taxation changes

Several adjustments in business taxation have been introduced, affecting National Insurance and corporate contributions:

• National Insurance contributions: Employers’ National Insurance contributions will increase to 15% from April, while the earnings threshold for these contributions is reduced from £9,100 to £5,000. This change is expected to generate £25 billion annually, supporting public services.
• Employment Allowance: To offset the National Insurance increase, the Employment Allowance will rise from £5,000 to £10,500, providing relief for smaller businesses and helping them manage higher NI rates.
• Business rates relief: Retail and hospitality sectors will benefit from a 40% business rates relief, capped at £25,000, helping businesses in these sectors manage operational costs. From 2026-27, a permanently lower business rates multiplier will be applied to retail, hospitality, and leisure properties.

Personal tax updates

The budget introduces adjustments in capital gains and inheritance tax, among other areas:

• Income tax and National Insurance: Personal tax rates remain unchanged, with the freeze on income tax and National Insurance thresholds set to end in 2028. This alignment with inflation aims to prevent tax bracket creep.
• Capital Gains Tax: The lower rate of Capital Gains Tax (CGT) will be increased from 10% to 18% and the higher rate from 20% to 24% for disposals of non-residential assets made on or after 30 October 2024. The rates on residential property will be maintained at 18% and 24%. The rate of CGT on assets qualifying for Business Asset Disposal Relief and Investors’ Relief will rise gradually to 14% from 6 April 2025 and to 18% from 6 April 2026. The CGT rates currently applied to carried interest will be increased to 32% from April 2025 and carried interest will be taxed fully within the Income Tax framework from April 2026.
• Inheritance Tax: The inheritance tax threshold freeze will continue until 2030, allowing £325,000 to be inherited tax-free. Additionally, certain business and agricultural assets over £1 million will face a 20% tax rate on the excess. From 6 April 2027, most unused pension funds and death benefits will also be included within a person’s estate for inheritance tax purposes, with pension scheme administrators responsible for reporting and paying any inheritance tax due on these pensions to HMRC.
• End of non-dom tax regime: Effective April 2025, the non-domicile tax regime will be replaced by a residence-based scheme, projected to raise £12.7 billion over five years.
• Stamp Duty surcharge: Effective immediately, the stamp duty surcharge on second homes has increased by 2 percentage points, now at 5%.

Wages and employment support

Reflecting a focus on improving wages, particularly for lower-income earners:

• Minimum wage increase: The National Living Wage for those over 21 will increase by 6.7% to £12.21 per hour, effective April 2025. For younger workers, a phased approach will eventually align all workers to a single adult rate.
• Carers’ Allowance: The weekly earnings limit for carers will be raised to align with 16 hours at the National Living Wage, allowing for higher earnings without affecting benefit eligibility.

Business support initiatives

To assist smaller businesses, the budget includes adjustments to reduce operational costs:

• Employment Allowance increase: Designed to alleviate tax burdens, the Employment Allowance will rise from £5,000 to £10,500, enabling thousands of employers to offset National Insurance contributions.
• National Wealth Fund investment: This fund includes £1 billion for the aerospace sector, £2 billion for automotive, and £520 million for life sciences manufacturing, aiming to support growth in key UK industries.

For individuals and business owners, the implications of this budget will unfold in the coming years as the Labour government’s policies take shape and the UK economy adapts to the new fiscal landscape.

To stay informed on all aspects of the Autumn Budget 2024, keep an eye out for our comprehensive guide coming tomorrow, where we’ll explore the full implications of these changes. If you have any immediate questions or concerns on how this budget might impact your financial or business planning, please don’t hesitate to reach out to your bk plus contact. We’re here to help you with these updates and make the best decisions for your future.