Autumn Budget 2024: the lowdown for you and your small business clients

The Chancellor, Rachel Reeves, unveiled her plans to ‘invest, invest, invest’ in the first Labour budget since 2010. While the announcements may pack a powerful punch for small business owners, there’s a lot that she didn’t mention in her televised speech that will affect accountants and bookkeepers too. Our Chief Accountant, Emily Coltman, explains the key takeaways.

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 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 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 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 NI contribution bills of £100,000 or less in the previous tax year to deduct £5,000 from their employer 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.

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.

Immediate increases to Capital Gains Tax & 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%.

The two reliefs which offer access to a lower rate of CGT - Business Asset Disposal Relief (BADR) and Investors’ Relief (IR) - will see phased rate increases 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 6 April 2025 and from 14% to 18% for disposals made on or after 6 April 2026.

Reeves also announced the government plans to increase Capital Gains Tax rates on carried interest (a performance-related reward earned by fund management executives) to 32% from April 2025 and deliver further reforms from April 2026.

Introducing advanced electronic signatures

The government will require tax advisers to provide an Advanced Electronic Signature when making certain income tax repayment claims from 6th April 2025. We don’t yet know which claims this will affect.

Changes to tax rules on liquidations of LLPs

From 30th October, the government are changing the way capital gains are taxed when a Limited Liability Partnership (LLP) is liquidated, and assets are disposed of to a contributing member or person connected to them.

Previously, if a member contributed an asset to an LLP and it was later returned to them or to a connected company during liquidation, neither of these disposals was subject to tax.

However, the changes announced in the Autumn Budget, effective from 30th October, now mean that any gains from this situation will be taxable. The member will be liable for any gain when they contributed the asset, while the LLP will be responsible for the gain that accrued when it disposed of the asset.

Close company loans to shareholders

Up until 30th October 2024, if a close company made a loan to a participator to avoid tax, and the participator repaid the loan, no tax would be payable. The changes announced in the Autumn Budget provide that tax will be payable on these loans even if they are repaid if their purpose was to avoid tax.

Extending 100% First Year Allowances for zero emission cars

The government will extend the 100% First Year Allowances (FYA) for qualifying expenditure on zero-emission cars for another year. This will mean these allowances continue to 31st March 2026 for Limited Companies and to 5th April 2026 for sole traders and partnerships.

Double-cab pick-ups are confirmed as cars for certain tax purposes

Starting 1st April 2025 for Corporation Tax and 6th April 2025 for income tax, double cab pick-up vehicles (DCPUs) will be classified as cars. This means that for capital allowances, benefits in kind, and certain deductions from business profits, DCPUs will be treated like cars. However, for VAT purposes, we believe that they will still be considered vans, meaning that VAT could still be reclaimed when purchasing one.

High Income Child Benefit Charge

The government are not proceeding with the reform to base the High Income Child Benefit (HICBC) on household incomes. Instead, from 2025 (no further date specified), employed individuals will be able to pay their HICBC through their tax codes which could remove a considerable number of people from the requirement to fill in a tax return.

For those not paying through their tax code, the government will pre-populate Self Assessment tax returns with HICBC data with the presumed aim of removing the risk of people not realising they have to pay it.

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

And to keep your clients informed, you can share our blog post on what the Autumn Budget means for small businesses.