2024 Budget: How Will This Affect You and Your Business?
The 2024 Autumn Budget: Implications for UK Businesses
The 2024 Autumn Budget introduces several changes with significant implications for SMEs, contractors, and specific sectors. By proactively addressing these adjustments, businesses can not only manage new costs but also create a foundation for resilience and sustainable growth. Here’s a concise overview of the key updates for easy reference:
NIC Increase: Employer NICs will rise from 13.8% to 15% in April 2025, with a lowered secondary threshold, from £9,100 a year to £5,000. However, Employment Allowance will increase to £10,500, benefiting smaller employers.
Business Rates: The 75% discount for retail, hospitality, and leisure sectors will reduce to 40%, capped at £110,000, starting in April 2025.
Corporation Tax: No rate changes; small profits remain at 19%, with 25% for larger profits. Full capital expensing for eligible investments continues.
Income Tax Freeze: Tax thresholds are frozen until 2028, which will affect take-home pay in real terms.
National Living Wage: The minimum wage will increase by 6.7% in April 2025, raising hourly rates to £12.21 for employees aged 21 and over.
IR35 & Contractors: NIC increases impact inside IR35 contractors, while outside IR35 contractors face evolving tax obligations.
Below, we explore these changes in greater depth, with actionable insights and opportunities for adapting your business to thrive in this evolving environment.
National Insurance Contributions (NICs)
From April 2025, the employer NIC rate will rise, increasing payroll costs. However, the Employment Allowance boost to £10,500 can offset costs for smaller employers.
Industry Examples:
Retail and Hospitality: These labour-intensive sectors may look to productivity enhancements, using automation or streamlined operations to balance wage costs.
Tech Startups: Small tech companies could benefit from the increased Employment Allowance, freeing resources for growth-focused investments.
Immediate Consideration: Conduct a payroll review, identifying areas for potential efficiency gains that align with budget goals and foster team productivity.
Strategic Opportunity: Investing now in productivity tools or flexible staffing solutions will build a resilient cost structure that supports growth, even with future NIC increases.
Business Rates
Business rates remain stable with the small business multiplier frozen, but the discount for retail, hospitality, and leisure sectors will drop from 75% to 40% in 2025.
Industry Examples:
Logistics and Warehousing: For space-dependant operations, this shift offers an opportunity to explore flexible layouts or shared facilities.
Hospitality and Retail: Businesses with physical storefronts may consider multi-use spaces or partnerships with complementary brands to enhance customer reach and maximise space efficiency.
Immediate Consideration: Evaluate property usage and lease agreements, assessing whether optimisations could improve your cost-effectiveness per square foot.
Strategic Opportunity: Creating an adaptable space strategy now positions your business to stay agile, supporting scalability and resilience in response to future rate adjustments.
Corporation Tax
Corporation tax rates remain the same, with the benefit of full capital expensing for IT, machinery, and other eligible investments.
Industry Examples:
Manufacturing: Capital expensing allows manufacturers to invest in automation, enabling productivity gains and long-term growth.
Professional Services: Firms can upgrade their IT systems to support flexible work and client collaboration, with immediate tax deductions enhancing the financial impact.
Immediate Consideration: Review your investment plans, prioritising technology and equipment purchases to capitalise on the expensing scheme this fiscal year.
Strategic Opportunity: Regularly leveraging capital expensing for incremental upgrades builds a modern, agile infrastructure that strengthens your competitive edge over time.
Income Tax
Income tax thresholds are frozen until 2028, which may reduce take-home pay in real terms as inflation rises.
Industry Example:
Freelance Contractors: Those in creative and professional sectors may explore income structures that optimise dividends and salary payments within the frozen thresholds.
Immediate Consideration: Assess income planning strategies, adjusting dividend and salary distributions to maximise take-home pay under current thresholds.Strategic Opportunity: Proactively managing income tax allows for stable, predictable financial planning, preparing contractors and small business owners to weather inflation-related impacts.
VAT
The VAT rate remains at 20%, with the registration threshold frozen at £90,000.
Industry Example:
E-commerce SMEs: Businesses nearing the VAT threshold can plan for registration, using this change as an opportunity to refine pricing and maintain profit margins.
Immediate Consideration: Evaluate pricing strategies and cash flow, preparing to incorporate VAT as your business grows without affecting profitability.
Strategic Opportunity: Building a flexible pricing structure that can adjust with VAT requirements helps maintain cash flow stability and supports seamless scaling.
National Living Wage Increases
The National Living Wage will increase by 6.7% in April 2025. This shift creates a chance for businesses to evaluate compensation strategies, improving workforce satisfaction and retention.
Industry Example:
Care Services: In labour-heavy sectors, focusing on productivity enhancements can help offset wage costs while maintaining service standards.
Immediate Consideration: Plan for increased labour expenses, considering automation and process efficiencies to align wage growth with productivity.
Strategic Opportunity: An empowered, well-compensated workforce promotes adaptability and quality, creating a resilient foundation for sustainable business growth.
Impact on IR35 Contractors
With IR35 rules in effect, contractors may see reduced take-home pay from NIC increases, while outside IR35 contractors face evolving tax obligations.
Industry Example:
IT Contractors: Contractors affected by IR35 may want to negotiate rates or adjust income structures to accommodate NIC changes.
Immediate Consideration: Review your IR35 status and evaluate potential rate adjustments to support a stable income in light of NIC increases.
Strategic Opportunity: Structuring contracts with flexibility and diverse income sources can improve resilience in a shifting regulatory landscape.
The Power of Strategic Partnerships
With rising costs, collaborative partnerships provide practical solutions for resource optimisation and growth. Here’s how different sectors can benefit from partnerships:
Cost-Sharing: Retail and logistics businesses could share warehousing or distribution centres to manage operational costs more efficiently.
Innovation Collaborations: Tech and professional services firms can join R&D efforts, combining expertise and minimising costs for mutual innovation.
Cross-Promotions: Retailers can team up for joint marketing, expanding reach without major increases in budget.
How Klostel Can Help
At Klostel Ventures, we specialise in strategic partnerships and business consultancy, helping businesses turn regulatory changes into resilience and growth opportunities. By combining a forward-thinking approach with actionable insights, we guide you in transforming challenges into strategic advantages.
Strategic Partnerships for Efficiency and Growth
Whether exploring cost-sharing, innovation, or cross-promotional alliances, Klostel helps identify and facilitate partnerships that optimise resources, control costs, and expand reach.
Optimising Operations for Resilience
From navigating NIC changes to planning for wage increases, Klostel offers tailored solutions to build an adaptable, efficient business model. We work with you to implement productivity strategies and streamline resource allocation.
Building a Future-Ready Foundation
Our goal is to create lasting, adaptable frameworks. By optimising space, integrating technology, and exploring partnerships, Klostel Ventures positions your business to thrive amid regulatory changes and future challenges.
Let’s Turn Today’s Changes into Tomorrow’s Success
Reach out to Klostel Ventures to discover how we can support your business through the 2024 Budget updates, establishing a foundation for resilience, adaptability, and growth.
