The Autumn Budget 2024: A mixed bag for SMEs

Today, the Chancellor of the Exchequer, Rachel Reeves, delivered her first budget and the first fiscal event from a labour administration in 14 years.

The new government has set out how it intends to steady the British economy, prioritising economic growth through investment and working closely with the private sector.

We’ve taken a look at the detail behind the headlines and the key policy changes affecting business in our region.

Capital Gains Tax

In order to raise revenue, the Chancellor has announced that Capital Gains Tax (“CGT”), paid on the increase in the value of an asset when it is disposed of, will increase immediately. The lower rate of CGT for gains that fall within an individual’s unused basic rate band will rise from 10% to 18%, whilst the higher rate will rise from 20% to 24%. Whilst this these increases fall short of bringing CGT rates in line with income tax rates as was rumoured, the higher CGT rates could lead to a more cautious approach to investment.

Currently, two reliefs offer access to a lower, 10% rate of CGT, Business Asset Disposal Relief (“BADR”) and Investors’ Relief (“IR”). The government will gradually cut both reliefs by increasing the applicable rate to 14% for disposals made on or after 6 April 2025, with a further increase to match the main lower rate of 18% on or after 6 April 2026. This phased approach will allow business owners time to adjust but is expected to influence the timing of sales.

The CGT paid by private equity managers on share of profits from successful deals will rise from 28% to 32% in April 2025, with further reforms expected in April 2026.

Corporation Tax

The main rate of corporation tax, paid by businesses on taxable profits over £250,000.00, will remain at 25% until the next election. This provides some certainty for businesses planning their finances, as they won’t face unexpected increases in this tax. However, the freeze does not apply to the ‘small profits’ rate, which remains at 19%, leaving room for potential adjustments in the future.

Wage cost increase

Earlier this year the Low Pay Commission recommended that the National Living Wage should increase by 5.8% to £12.10 from April 2025. The government has not only accepted the recommendations of the Low Pay Commission in full but has gone slightly further.

The National Minimum Wage for people 21 or older will rise by 6.7% from £11.44 an hour to £12.21 from April 2025, representing an increase of £1,400.00 to the annual earnings of a full-time worker on the National Minimum Wage.

In addition, the National Minimum Wage will rise for individuals aged between 18 and 20-years old from £8.60 to £10.00, an increase of 16.3%, the largest ever rise in both cash and percentage terms.

It is Apprentices, however, who will receive the largest increase, with their hourly pay rising from £6.40 to £7.55.

Businesses employing minimum wage workers will face higher wage bills, which will impact their overall operating costs. Some may need to reassess staffing levels or reduce hours to manage increased payroll expenses, or alternatively, consider raising prices to offset these costs.

Employer NIC increase

After much speculation, the Chancellor has said she will not increase National Insurance, VAT and income tax for working people, saying thresholds will rise in line with inflation from 2028.

However, the Chancellor has announced that employers’ National Insurance contributions will rise from 13.8% to 15%, and the per-employee threshold at which employers must start paying National Insurance on a worker’s earnings will be reduced from £9,100.00 per year to £5,000.00 per year. These changes will apply from 6 April 2026. The increased NICs may affect cash flow management for business, necessitating adjustments in budgeting and financial planning and requiring business to explore ways to mitigate the impact, such as optimising workforce efficiency.

To support smallest businesses, the government has announced that it will be increasing the Employment Allowance from £5,000.00 to £10,500.00, allowing more SMEs to benefit from this relief. The government will also expand the Employment Allowance by removing the £100,000.00 threshold, so that all eligible employers now benefit.

Business Rates

To facilitate long-term economic growth, the government has announced that from 2026 to 2027, it will introduce permanently lower business rates multipliers for high-street retail, hospitality and leisure properties (“RHL”). In the interim period (2025 to 2026), RHLs will receive 40% relief on business rates up to a cap of £110,000.00.

Investment in Infrastructure and R&D

The Chancellor has promised over £100 billion in capital investment over the next five years, focusing on transport, housing, and research and development (“R&D”). Businesses in these sectors could benefit from increased opportunities and government contracts. Additionally, the emphasis on R&D could spur innovation and growth, providing a boost to tech startups and other innovative businesses.

If the Autumn budget potentially affects your business, particularly your succession and exit planning, our Corporate Team are here to help. Please get in touch by email or call us on 0113 207 0000.

*Blacks Solicitors does not provide financial advice and the content of this blog post is for informational purposes only.