Autumn Budget 2024 - Are you spooked?
Did today's Budget spook you? Let's see what tricks we ended up with....
The small business will see out several halloweens throughout its lifetime, but will this be encouraging or just a bit too scary?
Employer's National Insurance 15%, Starting Salary £5,000, Employment Allowance £10,500 - April 2025
When a small company is underway, you'll probably take a mixture of salary and dividends. The balance has recently shifted in favour of salary where, broadly, there are higher profits and more than one director-employee.
As long as you remain entitled to the Employment Allowance the national insurance on your salary will be the same or lower. For one higher paid owner-director there will be no employer national insurance on salary up to £75,000 (15% of £75,000 - £5,000 = £10,500). For a salary of £100,000 the employer national insurance reduces from £7,544 to £3,750 before corporation tax relief.
However, for sole shareholder-directors not entitled to the Employment Allowance, the 15% due above £5,000 increases your national insurance bill on a small salary of £12,570 from £479 to £1,136, an annual increase of £657 before corporation tax relief.
Therefore, sole shareholder-directors should be spooked! And consider whether they might add one low-paid family member to their payroll. HMRC says the annual pay required is over £9,100 (or the new £5,000 presumably) but this is disputed and may now be tested in a future case. Or re-consider your viability as a limited company and become a sole trader!
If you were thinking of taking on more employees and the new £10,500 Employment Allowance is likely to be already used up, check the employer national insurance due to see whether this expansion remains viable.
Vehicle Capital Allowances and Benefits In Kind - April 2025 onwards
Your electric vehicle's benefit in kind will be gradually increasing over the next few years, but so will the Class 1A national insurance due by your company which can't be reduced by the Employment Allowance. Overall EVs remain pretty tax efficient, particularly if you can remain in the basic rate tax band.
Unlike double cab pick ups (DCPUs) which from April 2025 will be treated as cars for capital allowances and benefit in kind purposes. This will be expensive, particularly as the car benefit in kind percentages will be increasing. Therefore, if you were thinking of buying one make sure it's before April 2025.
Business Rates Increase - April 2025
If you are in retail, hospitality and leisure, the business rates relief will be reduced from 75% to 40%, which may spook you because it will increase your costs. Therefore, you'll need to revisit your budgets to see how you will fund this.
Income Tax Thresholds Increase - April 2028
You can look forward to an inflationary increase after three more halloweens which will help a bit but the real value much lower from where the allowances were first frozen.
Stamp Duty on Second Homes Surcharge 2% to 5% Increase - 31 October 2024
Actually increasing on Halloween so this must be spooky. If you build up some capital or interested in owning a buy-to-let or holiday home, this may well put you off. The stamp duty is already pretty high and this likely will discourage future investments.
Capital Gains Tax Increases - Entrepreneurs Relief (BADR) - 30 October 2024, April 2025 and April 2026
Capital gains tax will increase on all assets such as share portfolios to the same as that for residential property from 10%/20% to 18%/24% from today.
Once you get to a point of possibly selling (or liquidating) your business the rate you pay up to your lifetime limit of £1m will increase from 10% to 14% next April maintaining the 10% differential but to 18% from April 2026 to match the lower rate on other assets.
Perhaps a bit less spooky than it might have been, but BADR is going to be reviewed...
Inheritance Tax Increases - Pension Pots - April 2027 - Business Property and Agricultural Property Reliefs Curtailed - April 2026
Where affordable you may have put money into a pension scheme. Ensure you plan when and how to take your pension, as it will be part of your estate chargeable to inheritance tax should you die with any left!
Your trading business or company or farm currently benefit from 100% inheritance tax reliefs. From April 2026, there'll be a combined BPR/APR cap of £1m for 100% relief, with 50% relief applying above £1m.
If you grow your business to have a higher value than £1m and hoped to pass it on to your family, you may want to look at giving it away sooner than otherwise in the hope you survive 7 years instead. Or look at other planning options...
Increased Debt and Focus on the Public Sector
It is pretty spooky how much the country's debt will increase, affecting interest rates throughout the life of your business to help fund the public sector, but the government hopes you remain encouraged to grow the economy.
As always only take action after taking appropriate advice