Now that the details of the 2024 budget have been revealed businesses will be facing a fairly difficult period for a time.
It comes on top of last week’s introduction of new laws on workers’ rights and protections which was estimated as likely to cost businesses an extra £5bn a year to business costs.
Smaller businesses were offered some exemptions or relief, but businesses overall face having to pay higher minimum wages, higher business rates, as well as the cost of adapting to new workers’ rights under new laws.
The budget has added to the pressure on businesses particularly from:
- The national living wage. The legal minimum for over-21s, will increase by 6.7% to £12.21, equivalent to £1,400 a year for an eligible full-time worker.
- Capital gains tax will be increased. The lower rate will be raised from 10% to 18%, while the higher rate will rise from 20% to 24%. However, there will be no increase on the 24% capital gains rate imposed on second properties.
- Rise in employers’ national insurance contributions by 1.2 percentage points to 15% from April 2025.
- Air passenger duty will increase by up to £2 for each economy short-haul flight, Reeves says.
- Firms to pay National Insurance on workers’ earnings above £5,000 from April, down from £9,100 currently, with the rate increasing from 13.8% to 15%, raising an estimated £25bn a year.
- Employment allowance – which allows companies to reduce their NI liability – to increase from £5,000 to £10,500.
However, the chancellor confirmed that the freeze on fuel duty will be extended for at least another year.
- Permanently lower business rates for retail, hospitality and leisure businesses from 2026-27. Until then they will receive 40% relief on business rates up to a cap of £110,000.
While the measures are reasonably proportionate given the state of public finances, businesses will have to be careful to control their overheads in the months ahead.
Nevertheless, a close look at your business finances is in order and perhaps a chat with an adviser about the potential benefits of restructuring.
Businesses are advised to take a cautious approach to their finances and make sure they have records for every penny received and spent.
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