Autumn Budget 2024: key updates for small businesses

Emily Coltman FCA
Chief Accountant

Delivering the first Labour Budget for 14 years, Chancellor Rachel Reeves today set out the government’s plan to “rebuild Britain” which included major tax and spending changes that could have a big impact on your business.

The Chancellor announced changes to the rates, thresholds and allowances for National Insurance for employers, a new Corporate Tax roadmap and measures covering everything from business rates to property and petrol prices.

Here are the key changes that could affect small business owners and landlords.

Major changes to Employer’s National Insurance

Employers will pay National Insurance (NI) on workers’ earnings from a lower threshold and at a higher rate from April 2025 after the Chancellor announced changes to Employer's National Insurance. However, the Chancellor also announced that the Employment Allowance, which currently reduces NI for certain small employers, is to be increased from £5,000 to £10,500 at the same time, and the upper threshold will be scrapped.

A rise in the rate

Employer's NI - a type of Class 1 NI that employers have to pay to HMRC in respect of their employees’ wages - will rise from 13.8% to 15% from 6th April 2025.

The threshold falls

Employer's NI is currently paid on earnings over £9,100 and this threshold is to be reduced to £5,000 from 6th April 2025. This effectively means employers will pay the new, higher rate on more earnings.

Employment Allowance rises

The Employment Allowance currently allows businesses with Employer's NI contribution bills of £100,000 or less in the previous tax year to deduct £5,000 from their Employer's NI bill. But from April 2025, the government will increase the allowance from £5,000 to £10,500, and will remove the £100,000 threshold for eligibility. Limited companies that only pay Employer's NI on one employee's wages will still not qualify for the Employment Allowance if that employee is also a director of the company.

For full details of how employers should pay towards all National Insurance, including rebates and special rates, check the HMRC website.

Increase in National Living Wage

Ahead of today’s speech, the Chancellor had already announced a 6.7% rise in the National Living Wage for adults aged 21 and over. This means an increase from £11.44 to £12.21 an hour from April 2025 - which will amount to £1,400 more per year for a full-time worker.

The National Minimum Wage for 18 to 20-year-olds will also rise from £8.60 to £10 an hour in a first step towards eventually aligning the National Minimum Wage and National Living Wage to create a single adult wage rate - as pledged in the King’s Speech.

The government is also increasing the minimum wages for under 18s and apprentices to £7.55 per hour.

Businesses will have to factor in the pay rises for at least three million eligible workers.

Renewed commitment to Making Tax Digital for Income Tax

The government committed to delivering Making Tax Digital for Income Tax (MTD IT), which will require businesses and landlords with qualifying income to maintain digital records and update HMRC each quarter using compatible software (like FreeAgent).

MTD IT will apply to self-employed individuals and landlords with qualifying incomes (not profit) of over £50,000 from April 2026, and to those with qualifying incomes of over £30,000 from April 2027. In a new addition to the rollout, the Chancellor said those with incomes of over £20,000 would also be included by the end of this parliament (by 2029, at the latest). The exact timing for this last group will be announced at a later date.

Increased interest rates for late tax payments

Late payment interest is charged on unpaid taxes, including Income Tax, Capital Gains Tax and some National Insurance contributions when they are not paid by the relevant deadline. The rate is currently set at the Bank of England base rate plus 2.5%, which puts the current interest payable at 7.5%. As part of the government's attempt to ‘close the tax gap’, this rate is set to increase by 1.5 percentage points to the base rate plus 4% from 6th April 2025.

The new Corporate Tax Roadmap

Alongside the Budget, the government has published a new Corporate Tax roadmap. This confirms their pre-election pledge to cap the headline Corporation Tax rate at 25% for the duration of this parliament. The Small Profits Rate, which applies to companies with profits under £50,000, will be maintained at 19%. Marginal Relief, which allows companies with profits between £50,000 and £250,000 to reduce their Corporation Tax bill, will also stay at current rates and thresholds.

The roadmap also continues the UK’s “world-leading capital allowance offer”.

• Full expensing will continue for the length of this parliament. This allows limited companies to claim 100% first-year tax relief on qualifying purchases. The government also committed to exploring an extension of full expensing to assets that are bought to lease or hire out.
• The Annual Investment Allowance remains set at £1 million. This allowance provides 100% tax relief against the cost of qualifying equipment, and is not restricted to limited companies, so for small businesses, it will cover most purchases of assets.

The UK’s Corporation Tax relief for research and development will remain, with the rates for the R&D Expenditure Credit (RDEC) scheme and the Enhanced Support for R&D Intensive SMEs staying in place.

Changes to business rates

Retail, hospitality and leisure (RHL) properties in England properties will retain some relief for their bills in 2025/26, but the amount of relief will be reduced from 75% to 40% and the value of the relief will be capped at £110,000 per business.

The small business multiplier - the way business rates are calculated for properties with a rateable value below £51,000 - will be frozen at 49.9p for 2025/26.

As part of their pledge to replace the business rates system to “level the playing field between the high street and online giants”, the government plans to permanently lower business rates multipliers for retail, hospitality and leisure (RHL) properties in England from 2026/27.

Business rates rules are different in Scotland, Wales and Northern Ireland.

Fuel duty

Fuel duty will remain frozen for another year, which is good news for anyone relying on their vehicle for work or their business. This extends the 5p cut, first introduced in 2022, until 22nd March 2026. The government predicts this will save the average car driver £59 in 2025/26.

Increased stamp duty for second homes

The Higher Rate of Stamp Duty Land Tax - paid on the purchase of additional property - will be raised from 3% to 5% from 31st October 2024. This is an additional 5% applied for second homes, buy-to-let residential properties, and companies purchasing residential property.

Immediate increases to Capital Gains Tax and changes to reliefs

From 30th October, the lower rate of Capital Gains Tax (CGT) is increasing from 10% to 18% and the higher rate from 20% to 24%. This will bring all assets in line with the current rates on residential property, which will remain at 18% and 24%.

There are two reliefs which offer access to a lower rate of CGT:

• Business Asset Disposal Relief (BADR): when you sell (or ‘dispose of’) all or part of your business
• Investors’ Relief (IR): when an individual sells (or ‘disposes of’) all or part of their investments

The government plans to phase in rate increases to both BADR and IR to allow business owners and investors time to adjust to the changes. The rate of Capital Gains Tax that applies to BADR and IR is increasing from 10% to 14% for disposals made on or after 6th April 2025 and from 14% to 18% for disposals made on or after 6th April 2026.

Personal taxes: rates stay put but freeze on thresholds to end

Rates of Income Tax, VAT and National Insurance paid by individuals and employees are to remain the same.

There was some speculation in the run up to the Budget that the freeze on Income Tax thresholds was set to be extended and this could mean more people being pulled into paying higher rates over time - known as ‘fiscal drag’. However, the Chancellor announced that the freeze on Income Tax and National Insurance thresholds will end in 2028.

Changes to Business Relief for Inheritance Tax

Business Relief provides either 50% or 100% of relief on the value of a business or its assets when calculating the Inheritance Tax bill. The 100% rate band will be extended to the first £1 million of business and agricultural property. Above £1 million, the 50% rate will apply.

To learn more about all the changes announced in the Budget, you can read the full report on the government’s website.