The Autumn Budget: What does the budget mean for your business?

After much speculation, the Chancellor, Rachel Reeves has delivered her long-anticipated Autumn budget with a total of £40 billion of tax rises. Here is an overview of what this means for your business.

Employer National Insurance Contributions (NICs)

The Chancellor announced an increase to employer NIC by 1.2 percentage points to 15% which will take effect from 6 April 2025. Much more significantly she announced that the secondary threshold at which employers pay National Insurance on each employee will be reduced from £9,100 to £5,000 per year.

In an effort to limit the effect of these changes on small businesses, the Chancellor announced an increase to the Employment Allowance, which allows an employer to reduce its annual Employer National Insurance liability, from £5,000 to £10,500. The government will also expand the Employment Allowance by removing the eligibility threshold which only allowed businesses with total NICs bills below £100,000 to claim Employment Allowance. The Treasury says that the effect of these changes is that 865,000 employers will have no NIC to pay next year and over half of all businesses in the UK will pay the same or less than they did previously.

The Chancellor said that in the wake of these changes businesses that employ the equivalent of four full-time employees on the National Living Wage would not have to pay any employer NICs.

Corporation Tax

The Chancellor said the government has committed to cap the Corporation Tax Rate at 25%. She also announced that the Small Profits Rate will remain at 19% and the £50,000 threshold for this would be maintained. Marginal relief will also remain at the current rates and thresholds.

The Annual Investment Allowance of £1,000,000 will also be maintained, as will the existing Research and Development relief rates and Full Expensing.

Business Rates

The Chancellor announced that the government will introduce permanently lower business rates multipliers for high-street retail, hospitality and leisure properties from 2026-27. This will be funded by higher business rates multipliers on high-value business properties.

For 2025-26, for high-street retail, hospitality and leisure properties will receive 40% relief on their business rates liability and these properties will be eligible to receive support of up to a cash cap of £110,000 per business. This relief is not as generous as before so many will Business Rates increase.

For 2025-26, the small business multiplier will be frozen at 49.9p. The standard multiplier will be uprated to 55.5p.

Selling your business

As of today, Capital Gains Tax has increased. The lower rate (for basic rate taxpayers) has increased from 10% to 18%. The higher rate has increased from 20% to 24%.

The Capital Gains Tax rates for Business Asset Disposal Relief (which is available if you sell all or part of a business which you have owned for at least two years up to the date of the sale) will gradually rise to 14% from 6 April 2025 and will match the main lower rate of 18% from 6 April 2026.

These increases are not as dramatic as some reports suggested they could be - with some suggesting that Capital Gains Tax could increase to as much as 40% and that the Business Asset Disposal Relief would be scrapped – but the rate changes do have effect from today where some speculated that the rise would be delayed until April 2025.

After weeks of speculation, we now know that the brunt of the Chancellor’s tax rises will be shouldered by businesses. Whilst the government has attempted to alleviate the effects of these changes on the smallest businesses and eliminate cliff edges such as the Employment Allowance eligibility threshold, these are unlikely to give small and medium-sized enterprises much comfort who will see an increase in the cost of doing business.

If you have any queries on how these changes might apply to you or your business, or need advice as we approach many of these changes being enacted in the first quarter of next year, Leathes Prior Corporate and Commercial Team are ready to assist. Please contact us by email or by calling 01603 610911. To keep up to date with the ongoing news, make sure to follow the Leathes Prior social pages (LinkedIn, Instagram, X, and Facebook).