Today saw the first Budget by a Labour Government for over 14 years and the first ever by a female Chancellor, ostensibly facing the challenge of filling a £22 billion ‘black hole’ in the public finances left by the previous administration.

The Autumn Budget was anticipated with some trepidation by business, with a significant level of activity from owners bringing forward retirement plans by undertaking a voluntary winding up in time to beat today’s Budget, rather than risk the loss of the 10% rate of capital gains tax.

But do the measures announced today mean that Halloween will be scary for small business owners? Or is Rachel Reeves less of a fiscal vampire than they feared? And how will it affect the recruitment and contingent labour market, and the businesses who service it?

Employment Taxes

Employers seem to have borne the brunt of increased costs, through increases to the National Minimum Wage from April 2025 together with a 1.2% increase in Employers National Insurance to 15% also from April 2025.

The threshold at which employers begin to pay NI is also being reduced to £5,000 from £9,100 (down to £96 from £175 per week).

The full NMW increases to £12.21 with the 18-20 yr old rate seeing a larger increase to £10 per hour, following the Government’s intention to gradually merge these rates to have a single adult rate of NMW in due course. The apprentice rate will increase to £7.55.

Some small comfort for smaller employers is to be found in an increase in the Employment Allowance more than doubling to £10,500.

Income Tax and National Insurance

The rates of income tax and Employee National Insurance are unchanged, fears of an increase to the additional rate for the highest earners proving groundless.

As always, planning how you take money from your business to ensure that the total tax paid in both corporate and personal taxes is minimised, whilst retaining state pension entitlement is advised.

The marginal rate of income tax still increases dramatically over £100k of income, due to the withdrawal at this level of the personal allowance. This punishing system, which can generate tax rates of over 60%, was not amended in today’s Budget, and should still be planned for where possible.

Thresholds

Income tax thresholds and allowances have been frozen as set by the previous Government, but the Chancellor made a commitment to unfreeze these from 2028 and uprate in line with inflation, which should then start to alleviate some of the additional tax burden from ‘fiscal drag’ where incomes rise more rapidly than tax allowances, causing more taxpayers to fall into higher rates etc.

Pensions

Pension pots will now be brought within the scope of Inheritance Tax, other than which, surprisingly given the apparent attitude of this Government toward pensioners, no changes to contribution limits or lifetime allowances etc. were announced.

Child Benefit Rules

The High Income Child Benefit Charge is unchanged, albeit reform at some stage is on the agenda, the lower threshold for losing the benefit remains at £60k, and the upper limit is £80k.

Dividend Taxes

The amount of dividends which can be received tax-free is scheduled to remain at £500.

Corporation Tax

The rates of Corporation Tax have been frozen, this increased for many companies in April 2023, from a maximum of 19% to a variable rate from 19% up to 25%. There were no changes to this announced today.

VAT

VAT rates will be left unchanged, the threshold for registration will continue at £90,000. VAT will be charged on Private Education from January 2025.

Fuel Duty

No increase to fuel duty was announced, with nothing mentioned concerning any future ‘pay per mile’ proposals, which some commentators had suggested might be introduced.

Capital Gains Tax

The lower rate of CGT will rise from 10% to 18% with the higher rate rising from 20% to 24%.

Business owners who were at pains to trigger a transaction prior to the Budget and make any gains on a sale or winding up at the 10% rate of CGT may not have needed to be quite so hasty, but today’s announcements did confirm that their instincts were correct.

The £1m lifetime allowance for Business Asset Disposal Relief (note this applies per person, so spouses might look at planning to take the opportunity of this) remains but increases to the headline rate of CGT mean from 2025 the rate will rise to 14% and then 18% in 2026, something of a significant increase.

The current 10% rate remains for the rest of this tax year, so activity to trigger a gain prior to that is likely to be strong.

Inheritance Tax

The IHT nil rate band remains frozen at £325k plus the residential property allowance remains at £175k. Spouses taking advantage of the transferability of these allowances may pass £1m to the next generation without IHT.

However, in what may prove a controversial change with the National Farmer’s Union, Agricultural and Business Property reliefs from IHT are to be reformed with a £1m limit above which a 50% relief will apply reducing the rate to 20%, but as an asset-based tax, this may still force the sale of a family farm or business.

‘Non-Dom’ Status

The Government confirmed the abolition of Non-Domiciled tax status, which benefits internationally mobile people living in the UK but who have not chosen to officially ‘domicile’ here, but who plan to return overseas at some point. UK residency will be the determinant of the need to pay tax on all income (UK and overseas).

Savings and ISAs

It was feared that ISA benefits to savers might be restricted, perhaps by means of an overall cap in addition to the annual allowance, but no measure was announced, so for the time being ISA tax benefits remain.

Stamp Duty Land Tax

The surcharge on second homes is to be increased to 5% from tomorrow, potentially bad news for anyone looking to complete this week.

Anti-Avoidance & Compliance

The Chancellor repeated the Government’s intention to clamp down on non-compliant Umbrella companies, consultation regarding which has been ongoing for some time and shouldn’t come as a surprise to those operating in the sector, with measures such as statutory due diligence having been mooted, but her speech was short on detail.

Given a louder fanfare was the appointment of a Covid Corruption Commissioner, but whether this will extend to abuse of the CBILS loan scheme and if Directors of companies wound up owing debts under this will be pursued was not made clear, the headlines being the big PPE contracts.

Interest rates on unpaid tax debts are to be increased, it is unclear how much of a deterrent this might be since often the reason for unpaid tax is that a business is no longer financially viable and as such it may never be paid.

Although not announced in this Budget it is worth noting that From April 2025 Company Owner-Managers will be obliged to report more detail concerning dividends from their company under Income Tax Self-Assessment and it is worth ensuring all the relevant company law and taxation rules are met when making distributions.

In summary

Overall, a tax raising Budget, to the tune of £40bn, the largest sum for two decades, but perhaps less immediately punitive than many feared.

The least surprising changes, indeed Ministers were chastised by the Deputy Speaker for breaking protocol and leaking the news early, were the increased burden on Employers through increases in National Minimum Wage and Employers’ National Insurance. These will of course increase costs which need to either be saved or passed on, ultimately to consumers. The increase in Employment Allowance will soften this blow for the very smallest employers.

For those with plans to grow and hopefully sell in future, the foreshadowed changes to Capital Gains Tax on business disposals will reduce the net proceeds from a sale unless plans can be brought forward, for many still in the growth phase this may not be possible, but for those not quite able to move quickly enough to meet today as a deadline, there may still be some short space of time to cash in at the 10% rate.

Got a question?

If you have any questions regarding the Autumn Budget and its impact on you, please get in touch.