With time to consider the detail of the Autumn Budget it’s useful to reflect on the main changes impacting SMEs. Small businesses will be affected by many of the changes announced, particularly with regards to National Insurance contributions, fuel duty, and business rates.
Employer’s National Insurance Contributions
The main impact of the Autumn Budget on SMEs will be with regards National Insurance. Employer National Insurance contributions will rise by 1.2% to 15% from April 2025. The threshold at which employers start paying NI on each employee’s salary will also reduce from £9,100 to £5,000. The change adds a minimum of £615 per employee plus 1.2% on any earnings over £9,100. And the numbers could soon stack up; for example, an employee earning £40,000 will cost an extra £986 next year.
Whilst this move is set to raise £25 billion each year the change may have a significant impact on UK businesses, particularly for SMEs and those in the hospitality sector where staffing is a big expense.
The blow might be softened somewhat given that the Employment Allowance will rise from £5,000 to £10,500. The result of this is that very small businesses won’t have to make any employer National Insurance contributions next year. The government expects 865,000 employers won’t pay any NI, with over one million paying the same amount.
National Living Wage
The National Living Wage will increase 6.7% to £12.21 an hour. When the change comes into force in April 2025, three million low-paid workers will enjoy a £1,400 pay rise. In addition those aged 18 to 20 will see a rise of 16.3 per cent, to create a single adult wage. The change means younger people will be paid at least £10 per hour. Whilst the news is good for workers, many small businesses may need to consider their plans for new hires, or even review their workforce.
Fuel duty
Fuel duty has been frozen since 2011/12, and will continue next year together with a 5p cut. This will be welcome news for SMEs, particularly for those in rural areas, for whom rising fuel costs have been noticeable.
Business rates
Business rates are a tax on any property used for business operations. A 40 per cent relief on business rates for retail, hospitality, and leisure firms is being introduced to help support and stimulate the sector. A cap of £110,000 per business will apply, but this is unlikely to affect SMEs.
Capital Gains Tax
Capital Gains Tax (CGT) is charged on profits made from selling assets such as a second home or investments, including shares. CGT rates will increase from April 2025, although the rates for selling properties aren’t changing. The lower CGT rate of will rise from 10 per cent to 18 per cent, and the higher rate from 20 per cent to 24 per cent. This may affect business owners who are looking to exit their firms.