BLOGS
What does the 2024 Autumn Budget mean for businesses?
The Chancellor, Rachel Reeves, has unveiled Labour’s first Budget in 14 years, announcing a wide array of changes that businesses must be aware of, including raising taxes by £40bn.
Reeves opened by saying that the Labour Government can “fix the foundations”, adding that change must be felt, with more “pounds in people’s pockets, an NHS that is there when you need it and an economy that is growing”.
It was also stated that the Budget has involved a range of “difficult decisions”, blaming the last Government for leaving a £22bn “black hole” in the public finances.
Below we have summarised a few of the biggest announcements likely to impact businesses.
National Minimum Wage (NMW) increase
From April 2025, the National Minimum Wage for over-21s will increase by 6.7% from £11.44 an hour to £12.21.
For those aged 18-20, they will also see an increase, taking their pay from £8.6 an hour to £10.
Those on the apprentice rate – which applies to eligible people under 19, or those over 19 in the first year of an apprenticeship – will receive the biggest bump, taking their hourly pay up to £7.55 from £6.40.
Additionally, for those aged 16 or 17, the Minimum Wage will also rise from £6.40 an hour to £7.55.
Employer National Insurance Contributions (NICs) increase
During the Budget, the Chancellor announced that employer National Insurance Contributions will increase from 13.8% to 15% on a worker's earnings above £175, adding that this change should raise £25bn a year for the Government.
Additionally, the threshold at which businesses start paying National Insurance (NI) on workers' earnings is going to be lowered from £9,100 per year to £5,000.
"I know that this is a difficult choice, and I do not take this decision lightly,” Reeves added.
Dearbail Jordan, Business Reporter, commented on the changes, saying: "Businesses will have a lot to say about this. As widely expected, the chancellor has lifted employers' National Insurance Contributions, but the drop in the threshold at which businesses start paying it is pretty startling - from £9,100 to £5,000.”
Employment allowance increase
The Chancellor also announced that she is increasing employment allowance in an attempt to help smaller businesses.
Following the change, the employment allowance will increase from £5,000 to £10,500.
Reeves said that because of this change, 865,000 employers won’t pay any National Insurance at all next year and over one million will pay the same or less as they did previously.
Capital Gains Tax (CGT) increase
The Budget announced that Capital Gains Tax will increase; the lower rate will be raised from 10% to 18%, while the higher rate will rise from 20% to 24%.
No extension of income tax and NI thresholds freeze
The Budget also confirmed that there will be no extension of the freeze to income tax and National Insurance thresholds beyond the decisions of the previous Government.
Reeves says that from 2028-29, personal tax thresholds will once again be in line with inflation.
Inflation and growth predictions
During the Budget, Reeves stated that the OBR says CPI inflation will average 2.5% this year, 2.6% in 2025, then 2.3% in 2026, 2.1% in 2027, 2.1% in 2028 and 2.0% in 2029.
Reeves also says real GDP growth will be 1.1% in 2024, 2.0% in 2025, 1.8% in 2026, 1.5% in 2027, 1.5% in 2028, and 1.6% in 2029.
She adds that they aim to ensure all of the UK can meet its potential, aiming to tackle economic inactivity and expand opportunities for small and medium-sized businesses (SMEs).
Dharshini David, Chief Economics Correspondent, commented: "At first sight, it appears that the OBR’s growth and inflation forecasts for the next couple of years are higher than most economists including the Bank of England expect – i.e. this Budget significantly boosts both. That may risk interest rates falling more slowly than currently forecast."
Get Britain Working
The Government also announced that they will publish a “Get Britain Working” whitepaper which aims to get those who are unemployed back into work.
Protecting workers
The Budget also cemented the Government’s view on protecting working people from unfair dismissal and safeguarding them from bullying in the workplace.
A call for innovation
The Chartered Institute of Personnel and Development (CIPD) is calling on the Government to increase opportunities for young people and encourage innovation adoptions.
This week, the CIPD stated: “To help realise these aims the Budget will need to help set the direction for a new economic strategy that can help increase growth and productivity across all sectors and regions of the UK while supporting the transition to net zero.
“Kickstarting growth will have to be done against the headwind of an increase to employer National Insurance Contributions, while businesses will also have to adapt to the measures in the Employment Rights Bill as they are implemented over the next two years.
“This means there is an even more urgent need for the Government to make the necessary changes to public policy to support employers in investing more in the skills and wellbeing of their workforce and in technology adoption.”
Ben Willmott, Head of Public Policy at the CIPD, also commented: “To kickstart economic growth, there is an urgent need for measures that encourage employers to invest more in skills, employee wellbeing and technology adoption across the economy”
Preparing your business
The question must be asked: can businesses handle this change?
We always advise businesses to prepare well before any changes come into play to avoid being caught out by non-compliance.
Suppliers, such as IRIS, have a fundamental requirement to update their products and services in line with any legislative changes, in some cases removing the more logistic burden from businesses.
Whether you want assurance that your system reflects any major employee changes or you simply want a trusted provider with who you can outsource tasks such as payroll, a good supplier goes a long way in managing uncertainty.
To see the full Budget and everything that was announced, click here.