2024 Autumn Budget: The impact on businesses

At the end of October, Chancellor of the Exchequer Rachel Reeves presented the first budget of the new government, and the first-ever budget by a female Chancellor. There are far-reaching implications for businesses and employers, but some of the measures that are likely to have the biggest impact across all sectors include:

• National Insurance: Increase in employer National Insurance (NI) contribution rate to 15% and reduction in Secondary Threshold (ST) to £5,000. The Employment Allowance increased to £10,500
• Minimum wage: National Living Wage (NLW) to be £12.21, a 6.7% increase, with bigger increases to the National Minimum Wage rates
• Corporation Tax: Main rate of corporation tax will remain at 25% for the duration of this Parliament. This provides certainty for businesses, allowing them to plan their tax strategies
• Capital Gains Tax: An immediate increase in the main rate and higher rate to 18% and 24% respectively. An increase in the rate on carried interest to 32%

National Insurance

The main implication of this budget for most businesses will be the increase to employer NI contributions. The reduction in secondary threshold will result in an extra £615 on the employer NI bill for most employees, in addition to the 1.2% increase in the rate payable. The increase in employment allowance, and removal of the eligibility requirement for NI liabilities to be below £100,000 in the previous year, eases some of the burden but will only be of significant benefit to very small employers.

Minimum wage and living wage

Minimum wage rate increases narrow the gap between the minimum wage and the living wage, with the plan still being that the living wage will apply to all adult workers at some point in the future. This does however increase labour costs for many employers, and further increases the risk of unintentional breaches of NMW regulations due to salary sacrifice. This leaves businesses with the choice between increased administration burden to ensure workers are paid the minimum wage or withdrawing salary sacrifice pension arrangements which could leave many employees worse off and further increase employer NI costs.

Retail and hospitality relief

There were measures to support some specific sectors, such as relief on business rates for the retail, hospitality and leisure sectors, as well as a freeze on the multiplier for small businesses. Business rates remain a concern, and the government have committed to look at reform of the system. With this relief also came increases in taxes for other sectors such as tobacco and alcohol duty (though with a cut on the rate for draught beer).

Tax changes

Large amounts of spending were also announced in this budget, with more than £26bn promised to the NHS alone. There will also be extra funding for HMRC to help tackle the tax gap, the difference between tax owed and that collected by HMRC. To fund this, alongside tax increases there was also a change to fiscal rules to account for the anticipated benefits of investment spending, which will effectively allow government borrowing to be increased.

Around the time of the budget, the TUC released the results of a survey showing that more than half of businesses are losing working time due to the poor state of public services. If sick workers had better access to healthcare, then it is possible that businesses could become more productive. The Chancellor is clearly betting that increasing investment in infrastructure and public services will help to boost economic growth and productivity to offset some of the pain from the increased tax burden.

Included in the documents released after the budget was confirmation that the deduction of tax on benefits in kind and payment of Class 1A NICs through payroll will become mandatory from April 2026, as announced by the previous government. This came with the news that living accommodation and beneficial loans will initially be voluntary, with the existing P11D regime remaining available for these benefits. It is likely that HMRC will require a more granular level of reporting than is required by the current voluntary rules for payrolling benefits, and if their aim is to effectively recreate the P11D in the FPS, then this could create a great deal of additional administration for businesses. It would be sensible for organisations with benefits in kind to begin considering the processes they will need to get information to payroll departments efficiently to ensure their employees are taxed correctly.

Final thoughts

The 2024 Autumn Budget has significant implications for businesses and employers. While the government aims to boost economic growth through investment, businesses will need to navigate increased costs, particularly national insurance and minimum wage. There was however some much-needed certainty about future tax measures to allow for business planning and investment. Additionally, this was a budget from a new government and there are still measures for many of their manifesto pledges being progressed, such as the Employment Rights Bill. This means it will likely be some time before businesses can fully assess the impact and what it will mean for them.