How the Budget impacts business owners

The recent Autumn Budget 2024 has seen several changes which may impact directors of owner-managed businesses such as yourself. In this article, I will talk about how this can impact you both at the personal level and at the business level.

From the perspective of your personal taxation, there is going to be no changes to income tax rates nor thresholds, with current thresholds remaining frozen until April 2028.

From the perspective of your business, there is no change to corporation tax rate (being capped at 25%), with the small profits rate and marginal relief maintained at their current rates and thresholds.

However, the budget may have an impact on your costs if you employ any staff. From April 2025, there will be an increase in employers’ National Insurance Contributions (NICs) from 13.8% to 15%. The secondary threshold at which employers become liable to pay NICs will be reduced from £9,100 to £5,000 per employee, leading to further employment costs being incurred.

This may however be outweighed for smaller employers, by an increase in employment allowance from £5,000 to £10,500 starting from April 2025. However as a reminder, this allowance will not be available to you if you are the only director and have no employees in the business.

Another aspect which may impact your employment costs is the increase in national minimum wage to £12.21 per hour from April 2025, for adults over 21.

However, since employees’ wages as well as employers’ NICs are tax-deductible, the increased employment costs are also likely to attract a saving in Corporation Tax.

Given the recent changes, the historic savings that were available from taking a minimal salary and the rest of your remuneration as dividends, is no longer as substantial and therefore you might want to reconsider how you structure your remuneration from April 2025.

This could include salary, bonuses, benefits in kind and pension contributions, and unfortunately there is not a one size fits all, so please get in touch with your usual point of contact if you do want to look at this further.

Finally, I would like to mention the impact the budget might have on you if you are planning to sell your business. The disposal, under certain conditions, may qualify for business asset disposal relief (BADR), which currently attracts the lower capital gains tax rate of 10% on a lifetime limit of £1 million of qualifying gains. This rate is going to be increased to 14% from 6 April 2025 and then to 18% from 6 April 2026.

Every business is different and by understanding these changes and planning accordingly, you can manage the impact on your business and personal finances effectively. If you need more specific advice tailored to your situation, please feel free to get in touch with us!