Smith Allen Chartered Accountants

Chancellor Rachel Reeves’ inaugural Autumn Budget, presented on 30 October 2024, introduces several measures poised to impact small and medium-sized enterprises (SMEs) across the UK. This article distills the key announcements relevant to SME owners and business leaders.

Increase in Employers’ National Insurance Contributions (NICs)

Effective from April 2025, the Employers’ NIC rate will rise from 13.8% to 15%. Additionally, the threshold at which businesses begin paying NICs will decrease from £9,100 to £5,000 per year. These changes aim to generate approximately £25 billion annually to address the £22 billion deficit in public finances. While this move seeks to bolster public services, it has raised concerns among business groups about potential impacts on hiring and wage costs.

Enhancements to Employment Allowance

To mitigate the effects of increased NICs on smaller businesses, the Employment Allowance will be elevated from £5,000 to £10,500. This adjustment is designed to alleviate the financial burden on SMEs, enabling them to offset the higher NICs and maintain their workforce levels.

Reforms to Business Rates

The budget outlines a package of measures aimed at reforming business rates and supporting the high street. For the fiscal year 2025/26, the small business multiplier will be frozen at 49.9p. This initiative is intended to provide relief to small businesses facing escalating operational costs.

Capital Gains Tax Adjustments

The budget proposes an increase in capital gains tax rates, affecting business owners contemplating the sale of assets or shares. This change is part of a broader strategy to enhance public revenue but may influence decisions regarding business investments and disposals.

Support for Housing and Local Growth

An additional £3 billion is allocated to support SMEs and the Build to Rent sector through housing guarantee schemes. This funding aims to facilitate access to low-cost loans for developers, supporting the delivery of tens of thousands of new homes and stimulating local economic growth.

Implications for SMEs

The combination of increased NICs and capital gains tax, alongside reforms to business rates, presents both challenges and opportunities for SMEs. While the rise in Employment Allowance offers some respite, businesses may need to reassess their financial strategies to accommodate these changes. Engaging with financial advisors and staying informed about the implementation of these measures will be crucial for SMEs navigating the evolving economic landscape.

In summary, the Autumn Budget 2024 introduces significant fiscal adjustments with direct implications for SMEs. Proactive planning and informed decision-making will be essential for businesses aiming to adapt successfully to the new financial environment.