Autumn Budget 2024 summary for small companies and sole traders

On 30th October 2024, in the budget announcement, Chancellor of the Exchequer Rachel Reeves outlined plans to boost long-term economic growth by repairing the tax system and increasing public spending. With a £22 billion fiscal shortfall left by the previous government, Reeves pledged to make difficult choices in the budget.

‍Here are the main changes in the Autumn budget that sole traders and small businesses need to take into account when planning for the next 12 months:

Sole Traders

• Income tax will remain the same in line with previous budget announcements and will only change from year 2028-29
• National insurance – there are no changes to the national insurance rates for sole traders.
• Capital gain tax – The lower tax rate will increase from 10% to 18%, while the rate will increase from 20% to 24%. As a result of this increase people might want to keep their assets for longer, especially those that increase significantly year on year.
• Universal Credit – Lowering the cap on the amount taken from universal credit to pay off debts from 25% to 15%.
• Stamp duty land tax – the higher rates on purchases of second homes will increase from 3% to 5% starting from 31 October 2024. This increase means £10,000 extra cost on second home purchased for £500,000
• Inheritance tax – nil rate bands freeze at £325,000 will be extended by further two years to 5 April 2030. This will allow extended relief on some assets transferred within the 7 years timeframe.
• Non-dom tax regime – will be abolished in April 2024 and replaced with a new residence-based system which will be announced on a later date.
• Fuel Duty – freeze has been extended for another 12 months.

Small Businesses

• National minimum wage for people over 21 years old will increase by 6.7% to £12.21. This is equivalent to £1,400 a year extra for full time work which will increase business costs. The rate for people between 18-20 years old will increase to £10.00
• Employee national insurance will remain the same with no changes for the next tax year. This should be welcomed by employees as it will allow them to keep more from salaries from lower taxes already in place.
• Employer national insurance – will increase by 1.2% from 13.8% to 15%. Government also announced reduction in the secondary threshold from £9,100 to £5,000. This means employers cost in National insurance on an employee that earns £50,000 will increase by £1,106.
• Employment allowance – will increase from £5,000 to £10,500 reducing the burden of national insurance bills on small businesses. The employment allowance increase may mitigate some of the employer national insurance increase impact for many of the small businesses.
• Corporation tax – will be capped at 25% making no changes from previous announcements on companies. There will be no changes to the annual investment allowance (AIA) or R&D relief.
• VAT – No changes to the main vat rates or thresholds. 20% VAT on private schools will be introduced from 1 January 2025
• Investors’ relief lifetime limit –will be reduced from £10m to £1m for qualifying disposals made on or after 30 October 2024.
• Business rates – for 2025-26 eligible businesses in the retail, hospitality and leisure business will receive 40% relief on their business rates up to £110,000 per business. This is a welcomed announcement as it would allow small businesses to keep some of the funds and invest in business activities.

The chancellor announced £240m to be spent on local services to get people back to work.

The government intends to spend £5bn on building new houses and reduce the right to buy discount committing over £100bn over the next five years for transport, housing and R&D activities to boost the long-term growth of the country.

The government also promised to tacklle fraud by assembling a Covid corruption commission to investigate illegal claims and giving extended powers to DWP to stop fraudulent claims.