Autumn Budget 2024 Predictions for SMEs

Ever since the government revealed that it had found a £22bn deficit in the nation’s coffers, UK business owners have been wondering what that might mean for them. After all, the prime minister himself has warned that the autumn budget will be “painful”.

Those concerns only intensified when he stated that “those with the broadest shoulders should bear the heaviest burden”. Indeed, it seems that, in general, the average employee should be shielded from too many changes, with a pre-election promise of freezes on National Insurance, VAT and income tax likely to be upheld.

With changes to many of the UK’s major taxes ruled out by the government, though, it only leaves a few options for any fiscal black hole to be plugged with. Of those remaining options, a handful could well affect SMEs. But which are most likely to appear in the autumn budget?

Capital Gains Tax

Business owners that are considering selling their companies in the near future will be looking nervously at rumours of a CGT hike. There’s good reason for that, too.

During the 2022/23 tax year only 369,000 people paid CGT, so for a fledgling government still trying to create a good impression, a rise here ruffles few feathers. Despite the relatively few affected though, it still raised over £14bn for the treasury during the same period.

Additionally, by simply cutting annual CGT allowances, or raising thresholds, Labour can still keep to their manifesto promises of not raising taxes (on a technicality at least).

Likelihood of change:

Scope for significant revenue? Check. Affecting relatively few? Check. Mainly concerning “those with the broadest shoulders”? Check.

From the government’s perspective, a change to CGT makes a lot of sense for the chancellor to make if she’s looking to recoup some revenue. It would be a surprise if this wasn’t one of the government’s targets.

Employer National Insurance contributions

While the government have confirmed that they intend to keep their manifesto promise of not raising National Insurance contributions paid by employees, they have been notably reticent about those paid by employers.

Paid currently at a rate of 13.8%, a raise of just 1p would see up to £17bn per year flowing into the treasury. Given the deficit they’re currently dealing with, this is sure to be a tempting option for the chancellor.

Likelihood of change:

While a 1p rise would almost solve the £22bn problem in one fell swoop, it would be an unpopular choice given the pledge to leave NICs alone.

That pledge hasn’t been extended to employers though, and if options elsewhere don’t yield sufficient funds for the treasury, this may prove too easy an option to ignore. This could well be where the majority of the deficit is bridged.

An increase of the National Minimum Wage

Labour’s pre-election manifesto mentioned an intention to transform the National Minimum Wage into “a genuine living wage”. As with any National Minimum Wage increase, those that hire staff on or close to this figure will need to find a little extra to cover the rise.

Likelihood of change:

Initially it seems as if this would be low on Labour’s list of priorities. After all, with so many other potential rises, it could be seen as a stressor too far for some businesses.

However, a rise in wages would also bring with it an increase in tax being paid. This would mean that millions of employees would pay more tax and NIC without a rate change, with the extra effectively being paid for by employers.

This could be a smart way to increase revenue while still adding some good news (for employees at least) to the budget. In reality though, an increase to meet the living wage (currently set at £12 per hour outside of London), would only yield around half a billion pounds if rolled out across the estimated 1.6m workers on National Minimum Wage.

Clamping down on tax avoidance

Tax avoidance and evasion has been a hot topic for Labour for a number of years, and it would be no surprise if they took the opportunity of their first budget to implement some changes.

There have been a handful of large corporations outed for their tax avoidance schemes in recent years, with legal loopholes leaving the UK treasury out of pocket by some considerable sums. Corporate behemoths such as Amazon and Starbucks have regularly been the target of ire because of their methods of working around the tax stipulations.

Whether the government can make changes that finally pull extra taxes from such companies is yet to be seen. Even if the smaller businesses such as tradespeople and takeaways are targeted by administrative changes though, it will be a lucrative change that few could argue with

Likelihood of change:

Almost certainly. This has been a key argument for the Labour party for years. In a climate that calls for the generation of as much revenue as possible to rectify a shortfall, the government will have no qualms in implementing such measures.

While large-scale legal changes may take some time to roll out, expect existing measures to be more stringently applied. Labour’s manifesto mentioned a £555m investment into HMRC to allow them to hire more compliance officers. There’s potentially up to £5bn a year to be claimed from avoided taxes, and a change here can’t really be viewed as negative.

A reform of business rates

Again, we can look to Labour’s manifesto for clues on changes they may make. Within it, they claimed to be committed to reforming the current system in an effort to “raise the same revenue but in a fairer way”.

This may actually benefit SMEs, as the rhetoric seems to suggest a targeting of larger, rather than smaller firms. Labour’s pre-election drive made big noises about being the new party for business, and to make good on those claims, there may have to be a sweetener such as this among the more “painful” policy changes.

Likelihood of change

Unless it’s used as a tool to appease SMEs, this change may have to wait until after the autumn budget. Their initial goal of raising the same revenue, however that takes place, won’t help to boost the coffers.

Fuel Duty

Not strictly limited to businesses, but an increase to Fuel Duty will certainly have an impact on many SMEs. Those with fleets may notice a difference, while those that work with imported or exported goods could well have extra costs passed on to them. Adding 5p to Fuel Duty would raise an estimated £2bn for the government.

Likelihood of change:

This depends on how well other measures can plug the deficit. This isn’t a change that would solely rest on “the broadest shoulders” though, as petrol stations and those affected by an increase would likely pass the costs on to the end consumer. As such, there are safer options for Reeves to look at, despite the green credentials a rise in Fuel Duty would offer.

Dividends

There’s been some speculation that dividend tax rates could be raised or that the tax-free allowance could be lowered.

Many business owners use dividends as a more tax-efficient way to pay themselves. While there are still rates to pay, they’re typically cheaper than taking the equivalent in bonuses or salary.

Likelihood of change:

There has been far less noise around this than other potential changes, so the likelihood of a change here is somewhat lower than other options. Those that generally pay themselves with dividends though, may want to declare and take their dividends before the budget so they can lock in the current rate just in case.

Worried about the forthcoming autumn budget?

If you think that any of the changes listed above could hurt your business, you need to act now. Getting ahead of the problem can allow you to put provisions in place that help you deal with any changes you encounter,

Our experienced advisers have overseen the fortification of many companies’ operations to make them more resilient to external changes. We can put plans in place that see your business thrive rather than just survive. Call us on 0800 975 0380, or email [email protected] for a free consultation to see how we can help.