A guide for UK business owners navigating the new budget
The Autumn Budget 2024 has recently arrived, bringing a fresh wave of updates for UK business owners to navigate. It’s a lot to digest, from changes in wages and national insurance contributions to new rules around employment rights.
Our accounting team has been spending time reviewing the details and fine print to get a grip on how these changes will impact business owners. There is a lot to go through, so let’s dive into the highlights and key points to explore what these changes might mean for you and your business.
National Minimum and Living Wage Increases
Firstly, wages are going up. From April 2025, the National Minimum and Living Wage is set to rise to £12.21 for anyone aged 21 and over. For businesses with a larger workforce or those operating in labour-intensive sectors, it’s a considerable expense to factor into your company budget for next year. This represents a 6.7% increase in the minimum wage for those over 21, which employers will have to pay.
Additionally, rates for employees younger than 21 are also increasing. From April 2025, 18–20 year olds will see their hourly minimum wage increase to £10.00 per hour, a 16.3% rise from the current £8.60. This is while 16–17 year olds and apprentices will earn £7.55 minimum wage per hour, marking an 18% jump from the current rate of £6.40.
Employers’ National Insurance Contributions Increase
On top of wage rises, Employers National Insurance is also going to increase. Employers’ National Insurance Contributions will climb from 13.8% to 15% from April 2025. While that might not sound like a huge leap, for an employee earning £35,000, it equates to an extra £566 per year in employment costs.
The income threshold at which you start paying Employers’ National Insurance will also drop, meaning you’ll contribute once an employee earns £5,000 instead of the previous £9,100. If you’ve got a payroll to run, this change will make a significant difference, especially for smaller businesses trying to keep their employee costs in check. These changes, alongside the rise in the minimum wage increase, will steeply impact any employer who employs a large amount of low-paid staff, especially if your business currently operates on already small profit margins.
Changes under the Employment Rights Bill
The Employment Rights Bill is also something to keep on your radar. Expected in early 2025, this legislation aims to shake up employee rights in a way that could bring challenges and increased costs for employers, while aiming to provide some improvements to the workplace for employees.
Statutory Sick Pay (SSP) entitlement will start from day one of illness, rather than having a three-day waiting period. Flexible working is also getting a boost, with employees now able to request flexible arrangements from day one on the job. You’ll still have the right to refuse these requests if they genuinely don’t fit your business needs, but you would be required to carefully consider an employee’s request for flexible working.
What is also new is expanded rights around unfair dismissal, which will be applicable from the first day of employment, along with a nine-month probation period.
Employers should also expect to give more certainty around employment contracts to those on a zero-hours contract, with guaranteed contracts available to employees who work regular hours over a 12-week period if they choose to no longer work on a zero-hours basis.
Termination and re-engagement practices, commonly known as “fire and rehire,” will now be deemed automatic unfair dismissal, except in cases where the financial viability of the business is at risk.
Employers planning redundancies affecting over 20 employees will also be required to conduct collective consultations. Protections for parents and pregnant employees are being strengthened, including safeguarding employees against dismissal for six months following their return from family leave.
Updates to the Equality Act 2010 will introduce explicit protections against third-party harassment and enhance employers’ responsibilities to prevent sexual harassment. Additionally, large employers with more than 250 staff will now need to publish gender pay gap data and action plans, as well as provide dedicated support for employees experiencing menopause.
All of these changes will incur significant employee costs for businesses and an increase in the time it takes for companies to manage their human resources functions. It is best to be aware of the changes now, so you can plan for which of these new regulations you will need to implement in your employment practices.
Business Rates Relief for Certain Sectors
On a slightly brighter note for some business owners, there are some reductions in business rates for the retail, hospitality, and leisure sectors. A permanent business rate reduction for these industries is planned from April 2026, which should be a welcome break for many in this sector.
In the meantime, after the current 75% rate relief ends in 2025, businesses here will enjoy a 40% reduction, capped at £110,000 per business. For smaller businesses with a property rateable value at under £51,000, the tax multiplier freeze for 2025 could provide some breathing room on business rate costs.
VAT Updates
VAT registration thresholds are being held at £90,000 in April 2025, which keeps the status quo here. However, if your business is in the private education sector, then from January 2025, private school fees will attract VAT at 20%, which is likely to be felt as a heavy impact for families with children in private schooling and private education-related service providers.
Making Tax Digital (MTD) Compliance
A digital transformation is also sweeping through the tax system with Making Tax Digital (MTD). By April 2026, businesses will be required to keep digital records and submit quarterly income and expense summaries to HMRC.
While this might sound like a bit of extra admin, many businesses already keep records digitally, so it may not be a drastic change. MTD will start with sole traders and landlords with incomes above £50,000, eventually including those with lower thresholds by 2027. Digital accounts systems are on the rise, and staying ahead here could save some headaches later by using cloud accounting software for your business.
Corporation Tax and Investment Allowances
One area that’s remained untouched (for now) is Corporation Tax. Rates continue at 19% for profits below £50,000 and 25% for those above £250,000, with marginal rate increases in between. The Annual Investment Allowance remains as it is too, allowing businesses to claim 100% tax relief on up to £1 million of qualifying investments in plant and machinery each year. So if you’ve got big spending plans in this area, this tax relief is still there.
HMRC Penalties and Late Filing Costs
Lastly, it’s worth being mindful of the penalties HMRC has in place for late filings and payments. Interest on late tax payments will increase to the Bank of England base rate plus 4% from April 2025. As ever, it’s best to get those returns in on time, saving yourself the extra expense and the stress of unnecessary fines.
Budget 2024 For Business Owners: The Conclusion From Our Accounting Team
All in all, this budget offers some significant changes for business owners. It’s a nudge to invest in digital systems, a reminder to budget for higher payroll and employer costs, and it will be a good idea to review your employment practices to ensure you meet the new regulations. With these changes in mind, business owners can approach the new financial year prepared and ready to adapt to the Autumn budget impact.
Navigating the complexities of payroll, corporation tax, and VAT can be challenging for business owners, it is a lot to balance while you run your business. At Freedom In Numbers, we offer comprehensive accounting services tailored to your needs, ensuring compliance and efficiency in these critical areas.
Our expert accounting team is dedicated to relieving your financial stresses, allowing you to focus on what you do best: giving excellent service to your customers and clients and growing your business. So get in touch with us if you are worried about changes in this coming budget to see how our team can help you manage your accounting going forward.
Related Content
