Last week Chancellor Rachel Reeves announced the 2024 Autumn Budget and as your trusted advisors, we have written up a short summary for you to read which contains the key announcements alongside thoughts from our Co-Founder Sam Newton.

1. Minimum Wage Increase

The headline is there is an increase in minimum wage across the board ranging from 6.7% to 18% and comes into place from 1st April 2025.

Sam Newton – “The continued increases to minimum wages will likely continue to put pressure on profit margins of small businesses. Over 21-year-olds will now have a minimum wage in excess of £22k. It will be important for businesses who have a high level earning around the minimum wage to review the impact and consider counteracting this with increased pricing.”

2. National Insurance Contributions (NICs)

There are 3 changes impacting national insurance for employers coming in from April 2025.

The rate at which employers pay national insurance will increase from 13.8% to 15%

They have also reduced the rate you start charging national insurance- this was previously £9,100 this has reduced to £5,000.

It is fairly common that during a budget they will take with one hand and give with another which is exactly what they have done- here they have increased the Employment Allowance from £5,000 to £10,500.

Sam Newton – “Overall if your national insurance bill is £10,500 then you will have no national insurance to pay and therefore be better off. If it typically exceeds this, you will likely see an increase as you are paying tax at a higher rate on a larger number.”

3. Inheritance Tax (IHT)

With inheritance tax the main change is extending the freeze on the tax thresholds until 2030.

4. Capital Gains Tax (CGT)

Capital Gains tax rates to increase immediately for shares and other assets. The lower rate will increase from 10% to 18%. Higher rate to increase from 18% to 24%.

The capital gains tax payable on sale of residential property remains unchanged at 18% for lower rate tax payers and 28% for higher rate tax payers.

Shareholders of businesses will see Business Asset Disposal Relief (BADR) relief stay at 10% up to 6th April 2025 where it will increase to14%, and 18% the year after.

For small business owners whose shareholding value is less than £1m have effectively been given an extra 5 months to sell with no impact, but it is clear BADR is being phased out. 

Sam Newton – “It is sad to see BADR which was formally entrepreneur relief phased out, it does feel like entrepreneurial business owners are being squeezed from all angles. The key is if you want to sell your business in the near future now is the time to speak to an advisor - Martin Dean who heads up Gravitate Corporate Finance will be more than happy to help – martin@gravitate.digital”

5. Stamp Duty

Stamp duty surcharge, paid on second home purchases in England and Northern Ireland, to go up from 3% to 5%, effective immediately.

Sam Newton – “This will reduce the desire for people to invest in investment properties due to the additional up front cost. The rates when you start to pay stamp duty will also decrease, further increasing the tax payable (this was already announced, no changes have been made to this).”

• The nil rate threshold which is currently £250,000 will return to the previous level of £125,000.
• The nil rate threshold for first time buyers which is currently £425,000 will return to the previous level of £300,000.
• The maximum purchase price for which First-Time Buyers Relief can be claimed is currently £625,000 and will return to the previous level of £500,000.

6. Employee Ownership Trust (EOT)

The government are looking at changes including potentially capping the 0% relief when selling to an EOT. There is also an indication of tighter restrictions going forward. 

Sam Newton - “Employee ownership trusts provide a really tax efficient way for shareholders to exit the business, with no tax payable to them as individuals and allow the existing employees to own the business through a trust. Again, Martin is best placed to help with this: martin@gravitate.digital”

Overall

Final thoughts from Co-Founder Sam - “It was clear that the changes were coming so no major surprises.  As the majority of changes seem to be immediate the advice to business owners is to assess how this will impact their business, particularly businesses that employ staff. It is important that business owners forecast and map out the changes so that they can make informed decisions about staffing levels or price increases. 

Business owners looking to sell, unfortunately you have been hit hard, however businesses looking to sell for less than £1m have an extra 5 months to do so with little impact.

EOT’s will continue to be popular and offer a great exit opportunity for shareholders to minimise there tax burden.”

If you have any questions on how these announcements will affect you or your business, please don’t hesitate to contact your designated Client FD or by clicking here.