Navigating the Budget: Key Tax Changes Impacting Businesses and Individuals

Introduction

In yesterday’s budget announcement, significant changes were introduced that will affect both businesses and individuals. From minimum wage increases to shifts in tax rates, these changes warrant attention as they will influence cash flow, hiring practices, and investment strategies.

Impact on Businesses

1. Minimum Wage Increases

   • Effective April 2025, the national living wage will rise to £12.21, with 18-21 year-olds earning £10.00.

     
     

2. Changes to Employer NIC

   • This increase, coupled with a 1.2% hike in employer National Insurance Contributions (NIC) to 15%, will put financial pressure on small businesses.

   • The secondary threshold for NIC will decrease from £9,100 to £5,000, amplifying costs for employers.

   • While the employment allowance rise from £5,000 to £10,500 will provide some relief, it’s worth noting that single-owner managed companies may not benefit significantly from this change.

     
     

3. Employer Pension Contributions

   • The rise in minimum wage will also lead to higher employer pension contributions, necessitating careful cash flow management for many businesses.

     
     

4. Corporation Tax Stability

   • On a brighter note, corporation tax rates will remain unchanged, keeping the reduced rate of 19% for the smallest companies. This stability may provide some relief amid rising operational costs.

     
     

5. Potential Business Strategies

   • Companies may need to adapt by reassessing hiring strategies, potentially opting for self-employed contractors or adjusting pricing structures to mitigate the impact of increased costs.

     
     

Tax Changes for Individuals

1. Capital Gains Tax Adjustments

   • Capital gains tax rates will see an immediate rise, aligning with residential property disposal rates of 18% and 24% for higher rate taxpayers. This change will affect investment strategies and real estate transactions.

     
     

2. Stamp Duty Land Tax (SDLT) Increases

   • The SDLT levy for additional homes will increase from 3% to 5%, effective from 31st October 2024, impacting property investors and second-home buyers.

     
     

3. Inheritance Tax (IHT) Revisions

   • Upcoming changes to IHT will include bringing pensions into the estate from 2027 and modifications to agricultural relief, prompting individuals to reevaluate estate planning strategies.

     
     

Conclusion

As these budget changes unfold, both businesses and individuals must stay informed and proactive. By understanding the implications of these tax adjustments, businesses can strategize effectively while individuals can prepare for future financial planning. Staying ahead of these changes is essential for navigating the evolving economic landscape.

Budget balancing act