How will the 2024 Autumn Budget impact my small business?

The 2024 Autumn Budget, presented by Chancellor Rachel Reeves on Wednesday 30 October, was a highly anticipated one – the first of the new Labour government, but also the budget that annually is the biggest indicator of changes to come for the following year, and where typically more drastic policy changes are announced. The Autumn 2024 Budget was no different, and as the first budget since Labour gained power in the general election, was expected to bring new policies to jumpstart the economy for their term.

With the new government promising not to raise taxes on working people but also fill a £40bn hole in the economy, big changes were expected, such as changes to capital gains and inheritance tax, fuel duty freezes, business rates and more.

Across the UK, owners of businesses big and small waited to hear what would be announced, and how it might affect their operations, as well as their staff and the future of their finances.

What was announced, and how it might affect you:

National Minimum Wage Increase

One of the most notable changes is the increase in the National Minimum Wage, which from April 2025 will see the minimum wage for adults over 21 will rise to £12.21 per hour, a 6.7% increase. This change aims to help to even the gap between the minimum and Living Wage, as well as even out any disparity between wage differences depending on age. In addition to this, minimum wage is rising across the board – with apprenticeship wages rising the most, jumping from £6.40 to £7.55 an hour to narrow the gap. This is a huge benefit for employees and workers of businesses – but will increase payroll costs for employers, affecting profitability and hiring capabilities.

Employers’ National Insurance Contributions

In addition to the rise in National Minimum Wage, employers will see an increase in National Insurance contributions from 13.8% to 15% from April 2025. This rise, combined with a reduction in the threshold at which employers start paying National Insurance from £9,100 down to £5,000, will significantly raise employment costs. To soften the impact of this, Employment Allowance will increase to £10,500 – but some businesses might still struggle with the increased cost of labour.

Business Rates Reform

From 2026/2027, business rates will change – and bring some benefit to businesses in the retail, hospitality and leisure sectors. From 2026, the sectors will benefit from two new lower business rates, which will replace the current 75% relief with a 40% one for 2024/2025. This reform in rates aims to help high street businesses, and encourage more into town centres – but some may not feel the benefit due to increased labour costs with the increase in National Minimum Wage and employer National Insurance contributions.

Capital Gains Tax Increase

Capital Gains Tax (CGT) rates are going to be increasing - from 10% to 18% for the lower rate and from 20% to 24% for the higher rate. This could discourage investment in small businesses, and might negatively impact their growth strategies.

Corporate Tax Roadmap

The government has outlined a Corporate Tax Roadmap, which caps the headline rate of Corporation Tax at 25% for the duration of the current parliament. This can provide some stability and peace of mind for small businesses, allowing them to plan for the future and look ahead to the next 4 years. The Corporate Tax Roadmap also includes policies like maintaining the small profits rate and marginal relief, which will benefit smaller enterprises.

Fuel Duty and Alcohol Duty

Fuel Duty will be continue to be frozen for the next year, maintaining the 5p discount, which will help small businesses to manage and predict transportation costs for their goods.

As for alcohol duty, draught alcohol will see a cut of 1.7%, to try to help struggling pubs and hospitality businesses. Non-draught products, like wine and spirits, will see a rise in alcohol duty from February 2025 in line with the Retail Price Index though – and so rates are expected to increase by 2.7%. Both of these changes to alcohol duty may mean that some businesses see no real change in their bottom line – and some seeing a negative impact, particularly if non-draught products are part of their key offering.

Inheritance Tax Reforms

Reforms to Agricultural Property Relief and Business Property Relief will see the first £1 million of combined business and agricultural assets exempt from Inheritance Tax, with a 50% relief on assets over £1 million. This change aims to support family-owned businesses but may still pose challenges for those with significant assets, and will mean some businesses will have to plan for Inheritance Tax liabilities in the future.

The 2024 Autumn Budget presented a real mixed bag for small businesses – with some policies like the increased Employment Allowance and business rates reform for hospitality, retail and leisure sectors offering some relief and support, some other policies like the rise in Employer National Insurance Contributions and Minimum Wage have potential to negatively impact profitability and running costs. Small businesses across the UK will need to assess what the changes will mean for them – having a look at their own financial plans and budgets to account for changes, and identify how they can reduce costs.

How else can businesses adapt to the changes announced in the 2024 Autumn Budget?

Review, and reassess

Update your budgets and adjust for increased payroll costs due to higher Employer National Insurance Contributions and wages for employees. While doing this, you might be able to identify areas in your business where costs could also be reduced, or your operations could be more efficient.

Managing your workforce

Most businesses will see an increase in payroll and staffing costs due to changes announced in the Autumn Budget. To offset this and manage your payroll costs more effectively, businesses may be able to consider part time or more flexible working arrangements to optimise the amount spent on labour. Many businesses could benefit from now investing in training for their staff – enhancing their skills and efficiency, to create higher productivity.

Utilising tax reliefs and existing incentives for businesses

Even though there will be an increase in Employer National Insurance contributions, creating higher payroll costs for businesses, the increased Employment Allowance of up to £10,500 should help to soften the impact. Ensure you’re taking advantage of the increased allowance, to avoid paying more than you have to!

If your business is in the retail, hospitality or leisure sector, you’ll need to apply for the new business rates relief to benefit from it.

Think about becoming more efficient

Could investing in new technology or processes help you to cut costs in the long run? There might be potential for you to streamline your operations and reduce manual labour costs, as well as other benefits to be had from increased efficiency. Energy efficiency is crucial here too, and could help you to reduce running costs, like electricity and other utility bills. You may be able to benefit from local and national schemes available that may help you to implement some energy saving measures – from lighting and power to electric vehicle charging and solar panels.

Potential new revenue streams

Are there any opportunities out there to diversify your product or services? This could create additional revenue streams, and help to protect your business in the future from any economic uncertainty.

There is also always room to strengthen and improve your digital presence to reach more customers. In times of economic uncertainty, most businesses scale back their marketing budget – but by investing in broadening your customer base and going digital, you could get ahead of the competition.

Get support, and stay informed

Times like the Autumn Budget can bring uncertainty and stress to business owners – from worrying about increased costs for their staff, to changes in their operations now and in the future. The best way to stay on track, is to stay informed of what’s happening – by networking with other businesses in your area and finding out what changes mean for you, with the added benefit of finding support in numbers.

You can also find support for your business on anything from your finances to your operations and marketing from local business support organisations.

Whether you’re confused about what the budget means for your business, or you want help figuring out what new policies will mean for your financial future, get in touch to find out how we can help you.