Understanding the Latest 2024 Budget Changes and What They Mean for Your Business
Today’s budget has brought a mixed bag of changes that will impact businesses and entrepreneurs across the UK. While some of these adjustments may seem positive, several measures could make it harder for businesses to thrive and grow. At Welf Accountants, we’re here to help you navigate these changes with clear, practical guidance tailored to your business needs.
Here’s a breakdown of key points from the budget, how they might affect you, and our professional insights to help you plan ahead. Remember, this summary covers only the primary highlights—reach out if you’d like to discuss any specific aspects or concerns in detail.
Key Budget Highlights and Our Expert Insights
1. Corporation Tax Capped at 25%
What Changed: The Corporation Tax rate will remain capped at 25% for the rest of this parliamentary term. The current marginal rate relief scheme will also stay in place, and capital allowances remain unchanged, with suggestions to simplify.
Our Take: While we’d have preferred the rate not to increase at all, we’re relieved that it’s not going higher. On this front, we remain neutral as there’s no immediate additional impact.
2. National Living Wage Increase
What Changed: The National Living Wage is set to rise to £12.21 per hour from April 2025, with younger workers (16-18-year-olds) receiving £10 per hour.
Our Take: This is a double-edged sword. For some industries, the wage hike could be a major financial burden, especially when paired with other taxing measures. While raising wages independently could be positive, we have concerns about its cumulative impact on small businesses.
3. Employer’s National Insurance Rate Increase
What Changed: Starting April 2025, Employers’ National Insurance (NI) rates will increase to 15%. Additionally, the threshold for Employers NI will drop from £9,100 to £5,000 annually, while Employment Allowance rises to £10,500. The £100K exclusion threshold for larger employers will be removed.
Our Take: This change will affect businesses differently. Smaller businesses may benefit from the increased Employment Allowance, while those with larger payrolls will face higher on-costs for employees. This measure could also affect director remuneration strategies, requiring careful tax planning. On the whole, we view this as an additional tax burden for owner-managed businesses (OMBs) and suggest exploring scenarios specific to your business to minimize impact.
4. Mandatory Real-Time Benefits in Kind (BIK) Reporting
What Changed: Real-time reporting of most Benefits in Kind through payroll will be mandatory from April 2026.
Our Take: This adds to the reporting burden, especially with Making Tax Digital (MTD) already ramping up requirements. Businesses should prepare for additional compliance efforts as 2026 approaches.
5. Low Emission Cars: Decline in BIK Attractiveness
What Changed: Low emission vehicles will gradually see less favorable tax treatment under BIK.
Our Take: As we expected, these benefits would not last indefinitely. If you rely on such incentives, it’s wise to re-evaluate vehicle policies as tax changes make these cars less appealing.
6. Abolishment of ‘Domicile’ Concept in Taxation
What Changed: The concept of “domicile” is set to be removed from the tax system.
Our Take: While this may not directly impact our client base, it reflects the government’s shift towards a more radical approach to tax reform.
7. Capital Gains Tax (CGT) Rates Increase
What Changed: Capital Gains Tax rates will increase to 18% and 24% across the board (excluding Business Asset Disposal Relief and carried interest).
Our Take: If you’re considering selling assets, this could significantly impact your after-tax gains. We suggest reviewing any planned disposals to assess potential tax consequences.
8. Changes to Business Asset Disposal Relief (Entrepreneurs’ Relief)
What Changed: While the relief cap remains at £1 million, the rate will increase from 10% to 14% in 2025 and 18% in 2026.
Our Take: This signals a move away from rewarding entrepreneurial risk, and the higher rates make gains on business disposals less appealing over time. For those planning to exit, timing has become critical.
9. Inheritance Tax (IHT) Adjustments for APR/BPR and Pension Pots
What Changed: Reforms to Agricultural and Business Property Relief (APR/BPR) for IHT were introduced, and pension pots are now included in the IHT regime.
Our Take: Although APR/BPR may be less relevant for some clients, including pension savings in IHT planning changes the landscape for using pensions as a tax-efficient method of profit extraction. Pension contributions remain beneficial, but this new regime calls for updated estate planning.
10. Investment in HMRC Staffing and IT Systems
What Changed: The government has promised more staff for HMRC and enhanced IT systems.
Our Take: While this improvement is long overdue, we’ll believe it when we see reduced wait times and improved efficiency in dealing with HMRC.
Planning for the Future
At Welf Accountants, we’re committed to staying on top of these developments and supporting you through the changes. For clients where these adjustments present specific challenges, we’ll reach out with tailored advice. For others, we’ll continue monitoring the situation and recommend updates as relevant.
Our goal is to ensure you’re prepared, informed, and well-equipped to handle any tax implications. Don’t hesitate to reach out if you’d like a detailed review of how these changes may affect your business or personal tax position.