Autumn Budget 2024 announcements that will hit small businesses

There has been a lot of media update about key announcements in the budget. I have focussed here on certain changes that will affect smaller businesses:

Employer National Insurance and Employment Allowance

From 6 April 2025:

• Employer NI will rise to 15% from 13.8%

• Employment allowance will also rise to £10,500

The threshold for paying Employer NI reduces from £9,100 to £5,000 which means that employers start paying employer NI on employee wages earlier

The lower earnings limit of £6,500, the point at which there is a credit towards state pension for a company director’s salary is now higher than the secondary NI threshold so this will now impact on modelling for salary/dividend options for owner managed businesses.

A restriction will be lifted which means Companies that had employer NI of more than £100,000 in the last tax year will qualify for this new enhanced relief whereas previously they did not qualify. The exception still remains for single director shareholder companies who do not qualify for employment allowance

Car benefits and treatment of double cab pick ups

From 6 April 2025:

• Van benefit charge will increase to £4,020 and corresponding fuel benefit to £769

• The car fuel benefit multiplier increases to £28,200 which means for an employee, it works out cheaper not to take company fuel unless they are doing over 9.000 private miles per annum

• A big shock, after the hasty U-turn by the Treasury in February of this year, double cab pick ups will no longer be accepted as vans, however if they are ordered and qualify (over 1 metric tonne weight) before 6 April 2025, then the current treatment will apply to 5 April 2029 unless it can be demonstrated that they are primarily built for the carriage of goods (unlikely if there are seats in the back to carry passengers)

No change to car benefit %s until 2028-29

Payroll

From 6 April 2025

• Uplift in minimum wages, significantly for the Under 18 (up to £7.55/hour) and 18-20 (up to £10/hour) age bracket

• Statutory sick pay change with removal of waiting days so SSP paid from day 1. However 28 week limit will still apply and odd days will now link within an 8 week period

• The rate remains at £116.75 per week or the prescribed % (90% of average earnings) whichever is lower

From 6 April 2026

• PAYE and NI obligations will fall onto the employment agency or end client if the umbrella companies paying contractors under IR35 deemed employment have made errors with tax

• Compulsory payrolling of benefits except for beneficial loans and accommodation

The employment rights bill is currently making its way through Parliament and will ban zero hour contracts, fire and rehire and introduce basic employment rights (statutory sick pay and unfair dismissal) from Day 1, although there is consultation over a statutory probation period, expected to be 9 months

The HR advice line offered by Lothian Accounting to its clients will become a more valuable tool for additional support as this bill comes onto statute: https://www.gov.uk/government/publications/employment-rights-bill-factsheets

Capital Gains Tax and Business Asset Disposal Relief

From 30 October October 2024, capital gains tax on disposals increases as follows:

• 18% for basic rate (up from 10%)

• 24% for higher rate and trustees (up from 20%)

• Residential property rates are unchanged so disposals of investments now aligned with residential property disposals

Carried interest capital gains tax will rise to 32% from 6 April 2025

Business Asset disposal relief increases to 14% from 6 April 2025 and 18% from 6 April 2026 with a £1 million limit. There are anti-forestalling rules for any contracts entered into after October 2024

Pensions

There has been no change to the current pension allowance, tax free lump sum withdrawal or rules around potentially exempt transfers (PETS)

The main impact is on private money contribution pension pots that will be subject to Inheritance tax for the first time from 6 April 2027. This will not impact on transfers to a spouse but beneficiaries of an inherited pension pot could pay an effective 67% tax charge on remaining pots if death occurs over 75 years (40% IHT and then income tax at additional rate of 45% i.e. only £33 kept out of £100 pension hence 67% effective rate)

Business Relief and Agricultural Property Relief

From 6 April 2026:

• 100% relief limited to first £1 million of assets (BPR and APR combined)

• Thereafter only 50% relief