October 2024 Budget

A summary for small business people

The first female Chancellor, Rachel Reeves, delivered the budget on the 30^th October 2024.  Hidden amongst the politics are some interesting changes.

We have summarised the key points below, focusing on the changes that will affect the small businesses we work with.

Small Business Focus

Employers National Insurance will increase from 13.8% to 15%. This is the tax paid by employers and not employees.

The threshold for employers paying NI will fall from £9,100 to £5,000.

This is one point we had been concerned about.  However, the Employment allowance is also set to increase from £5,000 to £10,500, meaning that small businesses which employ people will have a larger breathing space before they need to pay employer NI.

The top corporation tax rate will remain at 25% on profits over £250,000.  There is no increase on this.

The VAT rate is unchanged.

National minimum wage will increase by 6.7% from £11.44 per hour to £12.21 per hour for those aged over 21 from April 24.

An increase for those aged 18 – 20 will also take place and raise from £8.60 to £10 per hour.  This is with the aim of bringing the adult national minimal wage up to one level for all over 18 years old.

Annual Investment Allowance of up to £1m is to be maintained.

The Business Asset Disposal Relief has been maintained at £1m. This is a relief available when you sell your business.  This is a capital gains tax relief that reduces the rate of tax paid on the sale.  The rate is currently 10% but will change to 14% on April 25 and rise to 18% by 2027.

Personal Taxes

Rates for income tax and NI paid by the employee are unchanged.

The personal tax free allowance freeze will continue as planned until 2028 and then the freeze will be lifted and rise in line with inflation.

The Inheritance tax threshold freeze has been extended by a further two years to 2030 and remains at £325,000.

Capital Gains Tax

The rates will change from 10% to 18% for the basic rate and 20% to 24% for the higher rate.

The basic rate of capital gains tax on profits from selling shares will increase from 10% to 18%, and the higher capital gains tax rate will rise from 20% to 24%.

The rates on profits from selling a second home, or additional home, are unchanged.

Finally, one other exciting addition—HMRC will finally invest in its systems and hire additional staff. This is big news for us who spend hours on hold regularly.