Wednesday 30th October 2024 saw Chancellor Rachel Reeves deliver Labour’s first budget since the new government’s election earlier this year. After weeks of speculation and rumours flying around, it’s no surprise we were keenly following the announcements to hear what changes were in store for our clients.
For those in need of a little more information about what was discussed, we’ve summarised the key points directly affecting limited companies below. As a business owner, it’s super important to stay on top of these changes as the budget’s outcome is likely to directly impact on your finances. As such, your current business strategy may need adapting.
Employer’s National Insurance
The government announced the lowering of the Employer’s National Insurance (ERs NI) threshold from £9,100 to £5,000. The result of increasing the rate by 1.2% to 15% from April 2025, means more ERs NI will be payable by employers.
What does this mean for me?
As ERs NI is a company expense, it will however qualify for Corporation Tax Relief (which has been capped at the 25% rate), and limited company directors will still have the ability to choose the most tax efficient salary for both their company and for them personally. To help you work this out, we would recommend a chat with your accountant, who can discuss the optimum strategy for directors and their limited companies.
National Minimum Wage
Anyone with employees should be aware that from April 2025, the National Minimum Wage will rise by 6.7% to £12.21, an increase of circa £1,500 on a 37.5-hour average working week. By also increasing the 18–20-year-old pay rate to £10 per hour, and under 18s and apprentice rates to £7.55 from £6.40, the government confirmed their intention to move towards a single wage rate.
What does this mean for me?
Though single director/employers are unlikely to benefit from Employment Allowance (EA), the £100,000 ERS NI wage bill threshold has been removed and so those companies with ‘qualifying’ employees could utilise up to £10,500 (increased from £5,000) of Employers Allowance which will help to ease the burden of any ERs NI that would otherwise be due. An accountant could help you work through this and see if it applies to you.
Capital Gains Tax
Capital Gains Tax (CGT) will increase from 30th October 2024 with the lower rate of 10% increasing to 18%, and the higher from 20% to 24%. This will bring it in line with residential property, which stays at 18% and 24%.
What does this mean for me?
As this could have a direct impact on share transfers and disposals, it may be worth reviewing current assets or speaking to a financial adviser to make sure any disposal strategy you may have had is still going to work for you.
What’s staying the same for now?
- Pensions – While there were no changes announced to pensions, we did have confirmation of ongoing commitments to the triple lock, which is projected to rise to 4.1% in 2025/26. So, the ability to claim Corporation Tax on company contributions remains, making it a continued tax efficient strategy for some. None the less, you may find it worthwhile to check in with your financial or pension advisor to see if any current plan needs tweaking.
- Income tax – as expected, thresholds remain frozen until April 2028.
- Fuel duty – current rates remain frozen at 52.95 p per litre.
Conclusion
While reactions to this budget day may be mixed, we wanted to take this opportunity to reassure our clients that we’re here to provide support and guide you through any changes in legislation. The main point to take away from the budget is that there are lots of changes incoming, and the only way to remain poised for their implementation is to get familiar with your finances and current strategies. This will enable you to be flexible and adaptable to necessary changes.
Whether you need help tweaking current financial strategies or need more information on how these latest announcements will affect business life, we would suggest reaching out to experts who can give you regulated advice. If it’s an accountant you need, simply get in touch with us and we’ll be able to talk you through an effective plan that’s tailored to you.
