Autumn budget 2024: What it means for you?

How Labour’s tax increases will impact business:

National Insurance 

As widely expected, NICs for employers will rise 1.2 percentage points to 15% when the new tax year begins in April 2025. In addition, the threshold at which businesses start paying NI on a workers’ earnings will be lowered from £9,100 to £5,000. 

Employers currently pay NI at 13.8% on a worker’s earnings above £175 a week.

Higher taxes will impede companies’ ability to offer competitive packages, driving away top talent

The rise is more than predicted, but the chancellor said there would be measures to protect small businesses from the change. The government is increasing employment allowance from £5,000 to £10,500 in a bid to support smaller businesses. This will mean 865,000 employers won’t pay any NI at all next year. It is understood that over 1 million organisations can expect to pay the same or less as they did previously.

Capital Gains Tax

Capital Gains Tax (CGT) on carried interest is set to be increased to 32% starting in April 2025, with further reforms planned for April 2026. CGT on general assets will rise from 10% to 18% for the lower rate and from 20% to 24% for the higher rate.

Increases to the minimum wage

In addition to the hike in employers’ national insurance contributions, businesses will also have to contend with an increase to the minimum wage.

From April, the national living wage for those over 21 will increase by 6.7% to £12.21 an hour. This represents a £1,400 pay rise for a full-time worker on the minimum wage.

For workers aged 18 to 20, the minimum wage will rise from £8.60 to £10, representing a 16.3% increase – the largest such rise on record. This increase is intended to close the gap between the age bands as the government gradually moves towards a single minimum wage rate for all adults.

It threatens to stifle growth, hiring and productivity

The chancellor describes the pay boost as a “significant step” towards Labour’s commitment to deliver a “genuine living wage” for working people. However, the new minimum wage remains lower than the £12.60 per hour that’s recommended by the Living Wage Foundation, which bases its calculations on the cost of living and is voluntarily paid by 15,000 employers. 

Apprentices will also receive a pay rise as the apprenticeship rate increases from £6.40 to £7.55 an hour.

Improving skills and addressing economic inactivity

Reeves listed the creation of Skills England as one of seven key pillars to help grow the economy. This new public body, which had previously been announced by the government, aims to bring together businesses, training providers and unions to improve training and apprenticeship opportunities across the country.

The chancellor also announced £240m of investment in skills and support for the disabled and long-term sick to help them return to the workplace. The initiative, called Get Britain Working, is aimed at addressing the high prevalence of economic inactivity that has been present in the UK labour market since the pandemic, with 2.8 million people currently out of work due to long-term sickness.

Umbrella companies

During the budget announcement, Reeves also promised to “clamp down” on umbrella companies that exploit workers.

Business Asset Disposal Relief

Changes to Business Asset Disposal Relief (BADR) – formerly called entrepreneurs’ relief – have also caused concern among the business community.

BADR currently sets tax at 10% on exit takings for startups when founders sell their businesses, up to a threshold of £1m. This rate will remain at 10% this year, before rising to 14% in April 2025 and 18% from 2026-27. 

Every tax increase can deter investment, reduce cash flow and potentially halt expansion plans

National Wealth Fund

Reeves also laid out plans to capitalise the UK’s recently created National Wealth Fund by investing £70bn in it. Investment will focus on the “industries of the future” such as gigafactories, upgrading ports and creating 11 new green hydrogen projects across England, Scotland and Wales. These will be among the first commercial scale projects of this kind anywhere in the world, according to Reeves.

Research and development

Labour confirmed £20bn in R&D funding would be protected, with at least £6.1bn in core research flagged for engineering, biotechnology and medical science.

Reeves also confirmed multi-year funding of £1bn for the aerospace sector, £2bn in automotive, specifically for electric vehicles, and £520m for new life sciences or innovative manufacturing.

Elsewhere, Reeves set a 2% productivity and savings target for the public sector. She claimed tech would be used to drive these efficiency gains.