This week's Budget announcement has brought several changes that will impact small business owners, especially those managing payroll, taxes, and business costs.

While the budget aims to address economic stability and support working people, it introduces a range of financial adjustments that businesses will need to consider as they plan for the year ahead. At Carthy Accountants, we understand the challenges small business owners face and are committed to helping you navigate these new changes, ensuring you can adapt and move forward confidently.

Rachel Reeves, the Chancellor of the Exchequer, delivered the Autumn Statement on 30 October 2024, saying that this was a budget intended to fix the foundations of the economy, deliver change for working people, mend the NHS and begin the process of rebuilding Britain. 

On the face of it, the announcements have been kind to the average worker, but will have a greater impact on UK small businesses. Increases in the minimum wage and employers' National Insurance (NI) contributions, and changes to Capital Gains Tax are likely to be the big takeaways for most small businesses owners.

It’s designed to be a budget of short-term pain for long-term gain, with tough decisions made now to get the UK economy back on its feet and UK businesses on a more stable footing. 

Tax increases overall by about £36 billion per annum. In addition to the £22 billion hole identified in the current year departmental spending, much of which recurs in future years, the previous forecasts for future years implied unrealistic cuts in all unprotected areas.

£24 billion of this comes from an increase in employers’ National Insurance, £6 billion from changes in capital gains and inheritance tax, and £4 billion from increased fraud detection and other HMRC compliance measures. The balance of £2 billion comes from smaller measures, including the previously announced change to VAT on private school fees.

Let’s look at the big announcements and how they’re likely to affect small business.

Key changes to tax and National Insurance:

Employers’ NI contributions to increase

Employers’ National Insurance (NI) is currently charged at 13.8% on income over £9,100 per employee. This will increase in April 2025 to 15% on income over £5,000 per employee. The additional costs will be reduced/eliminated for smaller employers by increasing the Employment Allowance from £5,000 to £10,500. 

Capital Gains Tax (CGT) rates change

CGT is generally charged at 10% for gains falling within the basic rate tax band, and 20% for gains above that tax bracket. From 30/10/2024, those rates will increase to 18% and 24%, aligning them with the current rates charged on residential property disposals. 

BADR rate to increase

Business Asset Disposal Relief (BADR) levies a charge of 10% on the first £1 million of capital gains arising on disposal of qualifying businesses. That rate will increase to 14% from April 2025, and 18% from April 2026.

Amendments to Inheritance Tax (IHT)

The current threshold of £325,000 generally, or £500,000 where a residence is passed on to direct descendants, has been extended by two years to April 2030. From April 2027, pension pots and death benefits paid by a pension fund will be brought within the scope of IHT. Currently, certain agricultural property and businesses can be passed on free of IHT; from April 2026 the first £1 million will be exempt, together with 50% of the excess over £1 million, with the balance falling within the estate for IHT purposes. Shares listed on the Alternative Investment Market (AIM) and held for more than two years are currently exempt from IHT; from April 2026 only 50% will be exempt, so an effective IHT rate of 20% on those shareholdings.

Other tax and duty changes include:

Stamp duty

The additional stamp duty on the purchase of second (and other additional) residential properties will increase from 3% to 5% from 31/10/2024. Stamp duty on properties acquired by companies will also increase by two percentage points.

Business rates

Business rates relief of 40% for businesses in the retail, hospitality and leisure sectors will be applied from April 2025, capped at a relief of £110,000.

Electric vehicles

The 100% first year allowance on new electric vehicles has been extended for a further year up to 31/03/2026 (corporation tax) 05/04/2026 (income tax).

Fuel duty

Although widely expected to increase, fuel duty has remained frozen for a further year up to 22/03/2026.

Notable non-tax measures:

Minimum wage – minimum wages are increasing from April 2025: