UK Autumn Budget 2024: Major Changes for Businesses and Taxation
In her first Autumn Budget, Chancellor Rachel Reeves announced a series of measures aiming to address the UK’s £22 billion fiscal deficit while balancing public and business sector needs. Marking a significant shift under the new Labour government, these proposals reflect a strategic approach toward tax reform, spending adjustments, and fiscal stability over the coming years.
Key Tax Reforms
Capital Gains Tax and Business Asset Disposal Relief
Effective from 30 October 2024, Capital Gains Tax (CGT) rates for Members’ Voluntary Liquidations (MVLs) have been raised from 10% to 18% for basic-rate taxpayers and from 20% to 24% for higher-rate taxpayers. This CGT hike aims to reduce disparities between capital gains and income tax rates, though the differential remains attractive enough to incentivise business investment. Additionally, Business Asset Disposal Relief (BADR) rates, previously 10%, will increase to 14% in April 2025 and 18% by April 2026, with the lifetime limit held at £1 million.
National Insurance Contributions
In a move widely anticipated, employer National Insurance Contributions (NIC) will increase from 13.8% to 15% above an annual threshold of £5,000 from April 2025. However, employees’ NIC rates will remain unchanged, easing potential impacts on individual taxpayers while increasing business costs.
Business Rates and Small Business Reliefs
The budget introduces a phased reduction in business rates relief, dropping from the current 75% to 40% in April 2025. This adjustment nearly doubles the business rate bills for affected sectors, notably retail, hospitality, and leisure, though relief remains significant for smaller firms facing challenging economic conditions.
For small businesses, the Employment Allowance will rise from £5,000 to £10,500, offering relief to smaller employers impacted by NIC hikes. Small business multipliers are also frozen for the 2025-26 fiscal year, providing additional support in a high-inflation environment.
Compliance and Anti-Fraud Measures
To counter fraudulent practices related to pandemic assistance, a Covid Corruption Commissioner will be appointed, tasked with investigating misuse of government funds, including bounce-back loans and furlough grants. The National Crime Agency, Serious Fraud Office, and HMRC will work alongside this office to pursue over £7.6 billion in suspected fraudulent claims.
Corporate Tax and Fiscal Policy Outlook
The corporate tax landscape will experience stability, with the headline Corporation Tax rate capped at 25% for the remainder of the Parliament. Capital allowances and R&D tax reliefs remain unchanged, signalling support for business investment despite the tightening tax landscape elsewhere. Further consultations are expected in 2025 regarding the simplification of predevelopment costs, land remediation relief, and transfer pricing, providing avenues for longer-term fiscal policy refinement.
Broader Economic Impact and Industry Reactions
Business leaders express a mix of cautious optimism and concern. Many see the budget as a strategic realignment rather than immediate relief. Business groups have applauded the corporate tax cap and R&D incentives, but some warn that rising CGT and NIC rates could hinder growth for SMEs, already operating on tight margins. Dr. Roger Barker of the Institute of Directors noted the long-term risk to business confidence posed by these increased tax burdens but acknowledged the positive investment signals embedded in the corporate tax roadmap.
Labour’s Vision for Economic Renewal
Chancellor Reeves underscored the government’s focus on promoting small business growth, job creation, and infrastructure investment. The budget reflects Labour’s commitment to enhancing economic stability while managing public expectations through phased tax increases and ongoing support for key sectors. This approach, while challenging for businesses, establishes a foundation for tackling the UK’s fiscal challenges with an emphasis on long-term growth.
With these sweeping changes, businesses and taxpayers alike must now navigate a more demanding fiscal environment as the Labour government works to balance growth with fiscal responsibility.
