🍦Breaking Down the Autumn 2024 Budget for Small Businesses

Hey friend —

Woops. Signed off the end of 2023 with a ‘see you in 2024!’ and well, here we are! More delayed than I wanted but sometimes you just get stuck in your own head. So ta-da, we’re back!

This newsletter is going to focus on the main talking points from the recent Autumn Budget 2024.

Employer’s NI

This was the big one, initially making me question what Labour where doing when they not only announced an increase of Employer’s NI from 13.8% to 15% but also reducing the secondary threshold from £9,100 down to £5,000. For those unware, the secondary threshold acts like a mini-allowance where you don’t pay Employer’s NI on that first amount of someone’s salary. This move meant you paid more, and you paid it on a higher proportion of your employee salary.

Thankfully, before I started throwing my toys out the pram, it was also announced that the Employers NI Allowance would increase from £5,000 to £10,500, basically helping small businesses not feel this change at all, or if so, only slightly and taking a bigger stab at ‘larger’ businesses. I put larger in quotes because you can still be a small business and very much affected by these changes and if anything, it just makes it slightly more complex.

For single director businesses with no employees, you won’t be eligible for Employer’s NI allowance and the £9,100 tax efficient salary will no longer work from 2024/25. The option would be to drop down to £5,000 or make the most of your £12,570 personal tax-free allowance but pay a bit of Employer’s NI for the right to do so. Corporation Tax saving on the higher salary will still mean it works out better but once again the gap tightens on the tax saving here.

As an example, a small business with 6 employees, earning £26,000 on average working 40 hours per week and then we’ll also have 1 director on a £12,570 salary. For the current tax year of 2024/25 and considering the £5,000 employer allowance, the employers NI on this would be £9,472 as a cost to the business.

In 2025/26, however, this would actually be lower and a tax saving as the total Employer NI would be around £18,432. We take off the £10,500 allowance (instead of £5,000) and we now have £7,932 in Employer NI due for the year. Not bad.

It does depend on salary but generally as you start to go above 10 employees or you have an average salary of £35k+ it starts to swing the other way and you’ll have more tax to pay than the current year.

Other Taxes

Thankfully, no changes to Corporation Tax, VAT, Income Tax, Employee NI or the rates to inheritance tax.

On the Inheritance tax, the main change is that for the first time your pension is now considered as part of your estate and is factored into the calculations. Previously, investing into pensions was a nice way to avoid inheritance tax but from April 2027 this will now be fair game.

Capital Gains Tax saw an increase from 10% to 18% for the basic rate and 20% to 24% for the higher rate. This is for normal disposals like shares, crypto and other assets like this. Property rates are still 18% and 28% respectively and did not change.

Business Asset Disposal relief (BAD relief) is staying at £1m as a lifetime limit but the rate will increase from 10% to 14% from April 2025.

Business Rates will see the current discount of 75% reduced to 40%, effectively doubling business rates from April 2025.

Benefits in Kind and Vehicles

So, from April 2026 you will no longer be able to file a P11D form to declare taxable benefits for your employees. Instead, these will now have to go via payroll and be reported monthly.

On that note, Double Cap Pick-Ups (DCPU) will be considered cars from April 2025 and will not benefit from being classed as vans for tax purposes, even if they have the 1-tonne payload requirement.

If you’ve started to cry in your 4-door Ford Ranger, fear not. This will only affect vehicles purchased after 1 April 2025, and any vehicles bought before this date will continue under the current rules up to April 2029. This is a clampdown from HMRC to close the loophole so tax relief is available for vehicles for work, and DCPUs are starting to get too trendy, it seems.

Electric Cars will continue to be tax efficient for those looking to put cars through their business, although they will see a Benefit in Kind increase. It’ll be 3% in 25/26, 4% in 26/27 and 5% in 27/28.

Personal Tax and Miscellaneous

The Non-domiciled system in the UK will be abolished from April 2025 and will be replaced by a new residence test/scheme. This effectively will mean that if you live in the UK, you will pay tax here on your income worldwide. It is fairly nuanced and we will have to see what the test looks like but this will only affect you if you’re not originally from, or domiciled in, the UK and have worldwide income.

Private schools were hit hard with their fees being subject for VAT from 1st January 2025 and their protection from business rates being removed from April 2025. And to pre-empt the question, there isn’t a legitimate way to reclaim VAT fees for your children’s private school fees through your limited company. As with any cost, it needs to be Wholly, Exclusively and Necessary for the business.

Landlords or prospective landlords looking for additional homes to rent out will find that Stamp Duty has now increased from 2% to 5% for second-home owners.

Lastly, minimum wage will be increased again in April 2025
Over 21s: £12.21 per hour
18-20: £10 per hour
Apprentices: £7.55 per hour

For those that deal with alcohol duties, in February 2025 non-draught products will increase by 3.65% to align it with Retail Price Inflation (RPI) although draught products served in hospitality venues will be reduced by 1.7%. Basically, sell online and you pay more duty, sell in a venue and you pay less duty.

Lastly, those with tax debts with HMRC will find from April 2025 that the interest rate for those will increase, as well as HMRC’s methods and chasing to become more persistent and aggressive.

Summary

Overall, not the most exciting or revolutionary of budgets, but a strong indication of the government very keen to claw back money here and there where they can after a costly few years to say the least.

Anyway, that’s it for this week’s newsletter - if you’re still here, thank you for reading this far and I hope it was helpful. Do let me know if there’s anything you would like me to cover in more depth in future as well - the downside of a weekly newsletter is that you actually need to have content each week… (I knowwwwww, right?! 😲) So, if you have any burning questions or desires, do let me know by just hitting reply.

Anyway, see you in the next one!

Just FYI for Cone’s Christmas hours that we will be shut from Tuesday 17th December 2024 and will return on Monday 6th January 2025.

I wish you all a Merry Christmas and a Happy New Year!

Written and edited by Ben Nacca