Autumn Budget – What could it mean for your finances?

by | Nov 11, 2024

Businesses across the UK are set to face higher costs after Chancellor Rachel Reeves unveiled increased employer national insurance contributions in the Labour government’s Autumn Budget on Wednesday October 30th.

 

The Chancellor framed her decisions around the need to catalyse investment to deliver improved living standards, public services and a growing economy. To help protect ‘working people’, the Chancellor announced increased borrowing and tax rises that were primarily focused on businesses and asset taxes rather than taxes that would affect a worker’s payslip. But how will this directly affect businesses in the UK?

 

Employer National Insurance Rise

Employer national insurance contributions (NIC) are set to rise by 1.2% to 15% from April 2025. From April 2025, employers will pay national insurance contributions (NIC) on an employee’s earnings above £5,000 at the rate of 15%.

The employment allowance will be increased to £10,500 per year to help smaller businesses. This means that the secondary threshold, the amount at which an employer starts paying NICs on an employee’s earnings, will fall from £9,100 to £5,000.

This means that 865,000 employers will not pay any national insurance at all next year, and over one million will pay the same or less than they did previously.

 

Corporation tax capped at 25%

As mentioned as part of Labour’s manifesto prior to the UK election, corporation tax is being capped at 25% for the remainder of this Parliament.

In addition, the Government published a “Corporate Tax Roadmap” which is designed to give companies more certainty about the future for Corporation Tax.

This Roadmap reflects the views of businesses and tax experts, who have been clear that a stable and predictable tax environment provides the confidence needed to encourage investment, innovation, and growth over the long-term.

Check it out here: https://www.gov.uk/government/publications/corporate-tax-roadmap-2024

 

Inheritance Tax For Business Owners

From April 2026, individuals inheriting unquoted trading businesses worth over £1 million will effectively be subject to 20% inheritance tax on the amount that exceeds £1 million. Business property relief (BPR) and agricultural property relief (APR) will apply to businesses and farms worth under £1 million which will continue to receive 100% relief.

 

Have the markets responded positively?

Head of Asset Allocation at Coutts Bank, Lilian Chovin, stated that the markets have broadly responded positively to the Budget, with much of the announcements being ‘highly anticipated’.

Chovin explained: “In the build up to Wednesday (October 30th), investors were focusing on how the government would balance announcing infrastructure investments, requiring increased borrowing without compromising fiscal stability.”

The positive market response suggests investors are more optimistic about the potential growth of the UK.

 

What does this mean for the UK economy?

The Office for Budget Responsibility (OBR) said that this Budget delivers a large, sustained increase in spending, borrowing and taxation. UK economic growth forecasts by the OBR are more optimistic than those from the Bank of England and sees GDP to grow by 2% next year and 1.8% in 2026.

The OBR expects inflation to rise to 2.6% in 2025 and gradually come down to the central bank’s 2% target by 2029.

Rob Morgan, Chief Investment Analyst at Charles Stanley has stated: “it will be particularly interesting to inspect the commentary around the decision making and the BoE’s own interpretation of what Budget policies mean.”

“Justifiably, it may state that there are a range of impacts that are yet to be determined and that it will take time to adequately assess these. However, if it does fall into line with what other forecasters are suggesting then interest rate cuts are going to be shallower, slower and fewer than it previously supposed.”

Interest rates are widely expected to be cut by the Bank of England on Thursday November 7th, in a move closely watched by businesses and consumers. Most analysts predict that the benchmark rate will fall from its current level of 5% to 4.75% when the decision is announced at 12:00 GMT. For more information, please reach out to us at H2H Business Finance.