31 Oct Budget 2024: What Does It Mean for Business?
The 2024 Budget introduces substantial tax changes with the aim of stabilising the economy and increasing public investment. However, it presents both challenges and opportunities for businesses across the UK.
Tax Changes and Business Impact
One of the most notable changes is the increase in employer National Insurance Contributions (NICs), which will rise from 13.8% to 15% in April 2025, alongside a reduction in the threshold from £9,100 to £5,000. While the Chancellor framed this as a necessary measure to fund public priorities, business leaders like Dr. Roger Barker from the Institute of Directors warned it may hinder growth by discouraging hiring and wage increases. Though the employment allowance increase to £10,500 is expected to alleviate the impact on smaller businesses, this adjustment may not fully offset the increased financial burden for many firms.
Further increases in the National Living Wage – up 6.7% to £12.21 per hour – compound these pressures, making it more challenging for businesses to maintain profitability and competitiveness. The Confederation of British Industry (CBI) noted that while fair wages are essential, rising costs could limit firms’ ability to invest in technology and innovation, which are crucial for long-term productivity gains.
Capital Gains, R&D Relief, and Umbrella Companies
Capital Gains Tax (CGT) will increase to 32% for carried interest from April 2025 while the lower rate on general assets will climb to from 10 to 18% and the higher rate from 18% and 24%. The changes pose challenges to businesses relying on capital to fund expansion, as higher taxes can reduce available cash flow. However, the retention of R&D tax relief, along with the announcement of £20 billion in protected R&D spending, sends a positive signal for sectors reliant on innovation. In addition, the Chancellor pledged to “clamp down” on umbrella companies.
The Road Ahead
To ensure sustained growth and regional economic resilience, Reeves has also committed to increased infrastructure spending, which aims to revitalise supply chains and drive regional development.
Decisive follow-through on these commitments will be critical to securing the economic benefits forecasted in the Budget, allowing businesses to plan with confidence as the UK navigates its path to growth.
As always, the devil is in the detail.
By Katy Christie, Tax Manager, Infinity Partnership