UK Autumn Budget – information overload for businesses?

By now, you’ve probably heard the headlines and the buzz words. Labour has set out to “fix the foundations” and achieve economic stability through a series of bold measures – but what do these changes mean in practice for businesses?

Whether you’re a business in the UK, or looking to establish a presence on British soil, the following changes are set to impact your operations.

Employment Related Taxes

While a welcome shift in focus for some of the Nation’s lowest earners, the recent announcement brought with it a series of tax changes that will impact UK employers.

The headlines:

• Employers National Insurance contributions (NIC) are set to increase from 13.8% to 15%.
• The secondary threshold on which employers NIC isn’t due has been lowered from £9,100 to £5,000 per annum.
• The Employment Allowance will increase from £5,000 to £10,500, and the £100,000 threshold will be removed from April 2025. The move will apply to all eligible employers, although all other eligibility criteria remain unchanged. The Labour Government estimate that circa 865,000 employers will therefore pay no Employers’ NICs next year.
• The personal allowance threshold (currently £12,570) and bands will again rise in line with inflation from April 2028.

What does this mean for UK employers?

The increase in the Employers NIC cost and the lowering of the employer’s secondary threshold may be mitigated by the increase in the employment allowance for businesses that employ less than five employees and remain eligible for the Employment Allowance per other criteria (although this can be impacted by levels of remuneration).

For all other businesses, the cost of employing staff is set to rise with the combined impact of the increase in the employers NIC rates and the lowered threshold – not to mention the increase in the National Minimum Wage to £12.21 an hour (up 6.7%).

These changes will have a particular impact on businesses that employ a large number of part time workers, as the lowering of the secondary threshold will increase employers NIC costs by £615 per employee per annum.

Employers may therefore need to reassess their remuneration packages and hiring plans to accommodate these changes.

Relief for smaller businesses

If you are operating a small business, the enhanced Employment NIC allowance offers significant relief against the increases, considerably reducing annual NIC liabilities.

Strategic financial planning

Larger employers should begin engaging in strategic financial planning to manage the increased NIC liabilities, while smaller businesses should ensure to leverage the benefits of the expanded Employment Allowance.

Capital Gains Tax (CGT)

On the Capital Gains Tax front, whilst business CGT rates remain unchanged, there were significant changes to the CGT rates for individuals.

The headlines:

• Immediate increase in the lower rate of CGT (for basic rate taxpayers) from 10% to 18%.
• Immediate increase in the higher rate of CGT from 20% to 24%.
• No change to the CGT rate applicable for residential properties (18% and 24%).
• Increase CGT rate to 32% on carried interest from April 2025.
• Business Asset Disposal Relief (BADR) reduced CGT rate of 10% to be increased to 14% and again to 18% by April 2026.
• £1 million threshold on gains qualifying for BADR remains.

What does this mean for UK businesses and entrepreneurs?

Businesses who look to remunerate their employees via stock incentives / share options, may have to think about whether this is still the most appropriate method of remuneration, as the gains made by employees on sales of shares will be subject to these increased rates.

Businesses who offer Enterprise Management Incentives (EMI) should be mindful of the change to BADR rates, with employees’ gains under this scheme almost doubling from 10% to 18% by April 2026. However, it still is a hugely attractive scheme to operate, and so should likely be pursued if the company qualifies for the scheme.

Corporation Tax

In the land of corporation tax, the UK Budget left the main rate unchanged, with reference made to continued incentives for Research & Development initiatives.

The headlines

• Main rate of corporation tax (on business profits over £250,000) will remain at 25% until the next election.
• £1 million Annual Investment Allowance (AIA), writing down allowances and structures and buildings allowances are to remain.
• Full expensing of capital allowance relief and R&D relief rates are to remain.
• The Government reaffirmed its commitment to introducing the OECD’s Pillar 1 and Pillar 2 rules that are aligned to international developments. This is framework that aims to ensure large multinationals pay a minimum rate of tax within each jurisdiction where they have an operation.

What does this mean for UK businesses and entrepreneurs?

The stability in corporation tax rates, the £1 million AIA and current R&D relief rates will provide some certainty for businesses as they navigate other changes.

Adopting the Pillar 1 and Pillar 2 frameworks will ensure the UK remains in keeping with international tax reforms and will need to be on the radar for multinationals as they manage their tax obligations.

In summary

While plenty of change is afoot, with adequate strategic planning and external advice and support, businesses operating in the UK will be able to adapt and make necessary changes to meet the new requirements and remain compliant.

How ZEDRA can help

The team at ZEDRA are here to help you navigate these changes and ensure the continued success of your business, relieving you of administrative and governance burden.

From multinationals to small and medium sized businesses, ZEDRA has years of collective experience working with clients across a range of industries, providing a one-stop-shop approach to iron out the operational complexities for corporates and growing businesses.

We provide a full range of business process outsourcing solutions including company formation, accounting, banking, tax, VAT, HR, benefits and global payroll services alongside escrow arrangements and economic substance services.

Contact [email protected] for more information on how we can help you.