UK Autumn Budget 2024: Key Takeaways for Businesses and Founders
Harry Hasler, Dragon Argent’s Head of Accountancy, provides an analysis of the UK Autumn Budget 2024 with insights for business owners, entrepreneurs, and founders.
This budget brings significant updates to taxes, business rates, and incentives, all of which will shape financial strategies for UK businesses in the coming years. Here’s what to expect based on the latest budget changes.
1. Corporate and Business Taxes
Corporate Tax Stability: Corporation tax rates remain consistent, with a small profits rate at 19% and a main rate at 25% for companies with profits above £250,000. This consistency should allow businesses to forecast tax liabilities more effectively without the worry of unexpected hikes.
Investment Incentives: The "full-expensing" scheme has been extended, which means companies can deduct 100% of capital investment on new qualifying plant and machinery. This is especially beneficial for capital-intensive businesses, helping them invest in growth with a more favorable cash flow impact.
R&D Tax Reliefs: In line with the government’s focus on innovation, R&D tax credits remain stable, and reliefs are specifically supportive of "loss-making R&D intensive SMEs." This is valuable for startups and tech-focused businesses investing in research and development.
2. National Minimum Wage and Employment Costs
Rising National Minimum Wage: Effective from April 2025, the National Minimum Wage for employees aged 21 and over will increase to £12.21. Employers must prepare for increased payroll expenses, particularly in labor-intensive sectors. This could place pressure on small businesses that are already managing tight budgets.
National Insurance Contributions (NIC): Employers' NIC will rise to 15% above the secondary threshold, which has decreased from £9,100 to £5,000. This increase may deter some companies from expanding their workforce, potentially impacting growth and hiring plans.
Employment Rights Reforms: With the introduction of the Employment Rights Bill 2024, businesses will face tighter regulations around zero-hours contracts, "fire and rehire" practices, and new minimums for sick pay. Founders should review contracts and employment policies to ensure compliance.
3. Capital Gains Tax (CGT) Changes
Increased CGT Rates: The CGT rate has risen from 20% to 24% for individuals in the higher tax bands, which will affect business owners looking to exit or dispose of assets. Business Asset Disposal Relief (BADR) remains available but will see its rate increase from 10% to 14% by 2025/26. Entrepreneurs should strategise their exit plans and consider timing any disposals to minimise tax liabilities.
Employee Ownership Trusts (EOT): Changes to EOT regulations mean former owners can no longer retain control of the business through the trust after sale. Additionally, EOT trustees must now reside in the UK. Business owners considering succession planning through an EOT should assess how these adjustments could impact their control and long-term business goals.
4. Inheritance Tax (IHT) Adjustments for Businesses
New Business Property Relief (BPR) Rules: From April 2026, BPR will provide 100% relief on the first £1 million of qualifying assets only, with relief reduced to 50% thereafter. For business founders and family-owned companies, this change necessitates careful estate planning. Founders should review IHT exposure on company shares and consult advisors on optimal structuring strategies.
Unused Pension Funds: From 2027, undrawn pension funds will be included in the taxable estate for IHT purposes. For founders with substantial pension savings, this means potential increases in the tax burden on estates. Business owners may want to consider alternative estate planning options to manage their pension-related IHT liabilities.
5. VAT and Business Rates
VAT Thresholds: Registration and deregistration thresholds remain stable at £90,000 and £88,000, respectively, which is good news for smaller businesses looking to maintain a manageable VAT profile.
VAT on Private School Fees: Private school fees will be subject to VAT from January 2025, which could influence business decisions for companies providing this benefit as part of executive compensation packages. Additionally, businesses involved in the private education sector need to adjust their pricing and financial forecasts accordingly.
Business Rates Relief: Retail, hospitality, and leisure businesses will receive a 40% discount on business rates for 2025/26, supporting sectors still recovering from the pandemic's economic impact. This relief will help SMEs within these industries, providing some relief from operating costs and potentially allowing reinvestment into business operations.
6. Self-Employed and Entrepreneurial Support
NICs for the Self-Employed: Class 2 NIC rates have increased marginally, while Class 4 NIC thresholds remain consistent. This stability provides clarity for freelancers and sole proprietors as they plan for upcoming tax years.
Digital Transformation Initiatives: The government continues to promote digitisation, mandating e-invoicing for VAT-registered businesses by April 2027. Self-employed individuals, including smaller service-based businesses, should prepare for Making Tax Digital (MTD) for Income Tax Self-Assessment from 2026. Digitisation requirements mean investing in accounting software and training, essential for staying compliant.
7. Umbrella Companies
The Labour government has expressed concerns over the UK labour market, suggesting it isn’t performing optimally for workers or businesses and is contributing to broader economic underperformance. Umbrella companies, which were used to engage over 700,000 workers in the 2022/23 tax year, are a particular focus. Notably, more than 275,000 of these workers were associated with umbrella companies that failed to meet tax compliance requirements, leading to an estimated £500 million lost through disguised remuneration tax avoidance schemes.
Under new legislation, responsibility will now shift to agencies that rely on umbrella companies. These agencies must ensure correct income tax and National Insurance Contributions (NIC) are deducted and paid, creating a higher compliance standard and reducing potential tax liabilities from improper practices.
8. Outlook and Strategic Implications for UK Businesses
The Autumn Budget 2024 emphasises a stable but stringent tax environment. From increasing employment costs to tightened capital gains and inheritance tax reliefs, business owners and founders face a more complex landscape. This budget pushes businesses to reassess employment strategies, expand cautiously, and invest in digital tools to streamline compliance. Companies should also take advantage of stable corporate tax rates and R&D incentives to fuel innovation without sacrificing tax efficiency.
With the upcoming changes, proactive financial planning is paramount. Engaging with advisors early will help founders manage their tax liabilities, safeguard their wealth, and sustain long-term growth in the evolving UK economic climate.
Consult with one of our accountancy and tax advisors today to tailor a strategy that aligns with the new Autumn Budget and ensures your business thrives amidst evolving policies. Reach out for a personalised assessment and start planning for a stronger financial future.
Schedule a call with our accountancy team today ↓
Written by:
Head of Accountancy