Autumn Budget 2024: Reactions from the business community

Earlier today (30 October), Chancellor Rachel Reeves presented the much-anticipated Autumn Budget, introducing significant changes to employers’ national insurance contributions, capital gains tax, minimum wage and other areas. Let’s explore the reactions from the business community…

Paul Lavercombe, tax partner at BDO in the South East

“Today’s Budget announcement was all about ‘short-term pain for long-term gain’ with one big money raiser and dozens of other smaller but significant changes to tax rates and reliefs. 

“The big revenue raiser was the rise in Class1 employer’s national insurance which is set to reach 15% from April 2025.  

“This is just below the rate in force after April 2022 when the then Conservative government increased the main rate to 15.05% due to the introduction of the Health and Social Care Levy – a measure that was subsequently reversed at the mini-Budget of September 2022. 

“While this rise was widely trailed pre-Budget – possibly as a means of getting the bad news out early – it will have a significant impact on business as it is designed to bring in more than £122bn over the next 5 years.  

“Not only has the rate increased, but larger employers who do not qualify for the Employment Allowance will be disproportionately affected. This is because they will pay the 15% rate on a larger proportion of their employee’s earnings.  

“Leaving aside the debate over whether this was a breach of manifesto commitments, employer’s NICs do have the advantage of being very ‘collectable’, with limited opportunities for behaviour change to affect likely receipts.  

“Businesses will now have a short window of opportunity to rethink their budgets for the next financial year to take account of this change in employer’s NICs and the 6.7% uplift in the National Minimum Wage.  

“Taken together, these increased costs for employers could pose challenges in sectors with high employee numbers and low profit margins – notably businesses in the retail, leisure and hospitality and healthcare sectors. 

“For some businesses, these changes may impact hiring decisions, pricing strategies and future investment plans. For others already in financial distress, this change may be the straw that breaks the camel’s back. 

“In more positive news for business, the corporate tax roadmap published today does provide some predictability, with confirmation that the headline rate of Corporation Tax will be capped at 25% for the duration of this Parliament.

“There is also a commitment to maintain full expensing and the £1m annual investment allowance. Businesses should also benefit from infrastructure improvements, planning changes and public service investments.” 

Nick Gabay, partner in the Corporate & Commercial team at Thackray Williams

“The increase in Employer’s National Insurance Contributions will grab the headlines and could damage the government’s relationship with businesses.

“Even though the government said it would not increase taxes on working people, it is working people who are likely to feel the impact indirectly through higher prices and less generous salary increases as businesses seek to pass on the additional tax burden.

“The changes to the Capital Gains Tax (CGT) regime weren’t as punishing as many feared, with the main rate of CGT increasing from 20% to “only” 24% (when some rumours swirled around a much higher increase). 

“The CGT rate for lifetime gains on disposals of business assets of up to £1m from 10% to 14% next year and 18% the following year will hit entrepreneurs, and many will argue it disincentivises new startup businesses. But it still offers an advantageous rate compared to the disposal of non-business assets, so the Chancellor probably thinks she has struck the right balance.”

Elliot Lewis, partner and head of the private client department at Thackray Williams

“The increase in Capital Gains Tax (CGT) was much anticipated, but with the lower rate increasing 10 to 18% and the higher rate from 20 to 24%, the hike is less than many had feared. Property taxes are unchanged and business asset disposal relief stays at £1 million, but the rates will increase from 10% to 18% over the next few years. These combined increases are going to lead to a reassessment of investment and the need for effective wealth management to mitigate against the impact of these changes as far as possible.

“While Business and Agricultural Property Relief will remain for the first £1 million, the introduction of a 20% tax beyond that with a 50% relief applied will lead to many clients looking at the assets they hold and are likely to alter the type of assets people invest in.

“While families will be pleased that the Inheritance Tax (IHT) thresholds and allowances remain unchanged until 2030, in reality, this will mean more estates being subject to the tax due to fiscal drag.

“Bringing pensions into IHT from April 2027 will lead to a huge amount of pension planning being required over the next two to three years. More details on IHT treatment of pensions are emerging, but it looks like IHT allowances will be shared proportionately across various components of a person’s estate. This introduces a huge degree of additional complexity into the situation and makes it crucial that advice is taken both during lifetime and, just as importantly, when someone passes away.

“An executor will have an even more challenging task to ensure the tax position is properly disclosed and accounted to HMRC and the burden falls on the correct parts, especially if those assets pass to different beneficiaries.”

Martin Verrall, practice leader for Grant Thornton UK LLP in Gatwick

“Certainty, transparency and investment are attractive principles and the focus on growth in the Autumn Budget is welcome, but it needs to be backed up by targeted, regionalised plans that recognise local economic challenges and opportunities.

“In the South East, we have a lot of investment potential which aligns with the Chancellor’s “invest invest invest” mantra. As the second largest economic contributor among the UK’s regions and an area with some of the highest levels of productivity outside London, it’s a highly attractive area for businesses, investors and people.

“And this is before even considering its connectivity to the rest of the world through multiple ports and airports as well as its many well-established sectors, ranging from construction and professional services, to manufacturing and life sciences.

“News of funding for infrastructure, housing, healthcare and schools will be particularly welcome to many, with a large population and the need to keep attracting and retaining the best talent.

“However, higher rates of National Insurance for employers and Capital Gains Tax alongside an increased minimum wage are going to be harder for some to navigate. While there was relief for SMEs in the budget, business leaders are going to need to be careful about balancing these developments alongside a changing tax environment moving forward.”

Nick Fenton, CEO of Locate in Kent

“Inward investment to support the UK economic is critical if the government is to deliver on its commitment to attracting more investment into Britain, and we were looking to this budget to see how we can support overseas investment into the UK and business success for those already here. Kent and Medway has a major role to play in that.

“Today, the government committed to investing £100bn in capital investment over the next five years, making Britain a clean energy superpower, creating an industrial strategy and committing over £20 billion pounds toward research and development to unlock the growth industries of the future. That is all to be welcomed.

“In terms of capital spending, we hope that the government will recognise the contribution that Kent and Medway make to the UK economy through supporting investment in the county. This should progress towards increasing the capacity of the M2, action to restore international rail services through the county and giving the go-ahead to the Lower Thames Crossing.

“Kent and Medway, as a region, has outperformed the UK economy over the past year for many reasons including our strategic location, being close to London and at the gateway to Europe.

“We also need to take care to ensure we support business growth and innovation, without adding undue costs and it will be interesting to see the impact of today’s tax changes, in the round, on levels of employment and future growth.

“From life sciences to green technology, Kent and Medway is making a significant contribution to the UK economy. To deliver on this budget, the government needs to support the regions in attracting investment, building on the innovation already taking place and deliver for the long-term.

“We welcome the recognition of the importance of these key sectors to the economy by the government, including the £520 million for a new life science innovation manufacturing fund and the £6.1 bn to protect core research funding for areas like engineering, biotech and medical science. 

“These are areas where the Kent and Medway region is already leaving its mark on the world’s stage and bodes well for the future.”

Mark Lucas, partner at law firm Moore Barlow

“The UK’s decision to cap corporation tax at 25% through the current Parliament is a strong signal to international businesses looking for stability in a competitive tax environment.

“Coupled with the business rates relief for high-street and hospitality businesses, this Budget could provide much-needed certainty and encourage significant investment, especially for small to mid-sized enterprises.”

Chris Barlow, head of manufacturing at MHA

“There were winners and losers in the manufacturing industry from Rachel Reeves’s first Budget today. There was further formalisation on the commitment to introduce an industrial strategy, which also includes SMEs and significant spending commitments for aerospace, automotive and life sciences.

“Hopefully, this will encourage much-needed overseas investment that the UK manufacturing sector requires to allow it to grow to its full potential. 

“The announcement on a further commitment to skills has come as welcome news. The shortage of skills has been a perennial Achilles heel for manufacturers for years. It is hoped that this will plug the widening skills gap that the manufacturing industry faces. 

“However, employers have been hit. The increase in employer National Insurance contributions and the significant rise national minimum wage will have a knock-on effect and therefore have a considerable impact on businesses. 

“Business owners have also been impacted by the changes to Business Asset Disposal Relief, although the £1m threshold has been held, meaning that it was not as bad as had previously been feared. The changes to business rates relief will again impact business owners as will bringing pensions into Inheritance Tax thresholds. 

“However, there were some real missed opportunities. There were no changes to R&D or capital allowances. The former is a real missed opportunity (the new regime is too hard when looking at relief for smaller entities). Capital allowances already work relatively well.

“There were no changes announced to corporation tax which is still relatively high compared to our Irish neighbours. 

“There were also no announcements on dealing with Europe post-Brexit which remains a significant challenge for manufacturers particularly when it comes to challenges with supply chains. Yet, as always the devil will be in the detail as and when it is released.”

Faye Cook, partner in the corporate team at Thomson Snell & Passmore

Following M&A deal activity remaining subdued in Q1 & Q2 2024, the results of Q3 will undoubtedly be drastically different, with both cross-border and domestic M&A transactions racing to close before the delivery of today’s Autumn Budget, amid fears of a Capital Gains Tax (CGT) increase. 

“Players in the M&A & Corporate Finance sectors have been stretched to their limit in recent weeks as business owners and sellers have rushed to get their deals across the line. Their efforts were not in vain following Chancellor Rachel Reeves’ Budget this afternoon, which, with immediate effect, increased the rate of CGT from 20% to 24%. Any deals which did not complete before today will be subject to the newly higher CGT rates. 

“The Chancellor did maintain the CGT lifetime limit of £1million, she said, “to encourage entrepreneurs to invest in their businesses”. However, there were significant changes to the rates of Business Asset Disposal Relief (BADR), which will remain at 10% this year, but then increase to 14% in April 2025 and 18% in April 2026.

“This is anticipated to cause a spike in deal activity on smaller M&A transactions in the lead up to these rate increases next year and the following. However, the effect of this may be fairly minimal in the wider M&A Mid-Market transactions as the tax payable on any portion of the proceeds which attract BADR are likely to be fairly insignificant in the context of larger Mid-Market deals.”

Esther Lee, partner in the probate at Thomson Snell & Passmore

The Budget has been announced and it is a bad day for farmers and business owners. Currently, if you die owning business or agricultural assets that qualify for agricultural or business relief (AR or BR), or indeed give those assets away in your lifetime either outright or to a trust, then in many cases the value could be fully relieved from inheritance tax. The Chancellor has announced that from April 2026, these reliefs for inheritance tax are going to be severely limited.

“This is likely to hit farmers and landowners particularly hard. Due to the need to diversify income streams, these types of businesses are likely to have strands of their business model that would either qualify for BR or AR.

“Now, their value will be combined for calculating the relief. Whilst smaller businesses are still protected and can continue to pass free of tax the impact on higher-value businesses is likely to be substantial.

“The changes mean robust valuations of the business and agricultural assets will be vitally important.  Where farmland may have development potential and the land value is now over £1 million there are likely to be some high-value arguments between HMRC and the land owner or their executors.  

“This Budget makes estate planning even more important. Business owners will need to look at the possibility of making lifetime gifts in good time, considering entering into partnerships with the next generation and possibly insurance-backed products to help pay the tax.”

Rebecca Swain, head of residential property & conveyancing at Thomson Snell & Passmore

Despite all of the pre-Budget speculation of the Chancellor increasing Capital Gains Tax rates on residential property disposals, the rates were left unchanged (at 18% and 24%).

“Whilst this may have prevented a surge in investment property sales, the hike in the SDLT surcharge on the purchase of additional and second properties (from 3% to 5%) is likely to deter some from investing in residential property.

“It is hard to see how this will alleviate the rental property supply issues where demand outstrips supply and is driving rents higher. That SDLT increase takes effect from midnight on the 30 October, so there will be a rush of property buyers trying to get their transactions exchanged ahead of that deadline.

“As anticipated, the Chancellor has not frozen the current SDLT thresholds, which means that the rates will increase for all purchasers from the end of March 2025 as planned (including first time buyers). 

“This will no doubt mean that the market will remain buoyant until then, at least, and that there will be a rush to get matters exchanged and completed ahead of those increases.”

Nick Hoben, head of employment at Thomson Snell & Passmore

“With the Labour government’s fiscal plan to raise £40bn in tax over the next five years, it came as no surprise that instead of raising tax from the working population (although the fiscal drag of freezing tax bands and personal allowances until 2028 is unchanged from the previous government), the Chancellor announced that employers will have to pay more in employer’s National Insurance contributions, from 13.8% to 15% from April 2025 and with the lowering of the threshold for employer’s National Insurance contributions on earnings from £9,000 down to £5,000 per annum. 

“The other big announcements made today include raising the National Living wage from £11.44 per hour to £12.21 per hour from 1 April 2025 for those aged 21 years old and over.

“The 18–20-year-olds on National Living Wage will see their wage increase from £8.60 to £10 per hour. Apprentices rate will rise from £6.40 to £7.55 per hour. It is therefore likely that with inflation around 2.0% and these added costs of employment, employers will be prudent with wage increases or look to make cost of labour savings by restructuring.”

Martin Williams, partner at Mayo Wynne Baxter 

“The government has had the same difficulty in defining working people as others have had in trying to distinguish between workers and employees in terms of employment law and rights. The definitions of workers and employees, often wrongly conflated, are ripe for change, but that is still some way off.

“However, working people are definitely seeking a living wage and the government is edging closer to providing a base-level minimum wage that is deserving of the use of those words.

“There is still progress to be made, but at least the cost of living has been taken into account with this newly announced increase.

“Employers will cite the increase in cost base this rise will represent, and the same argument applies to the increase in employer National Insurance contributions. Whether the increases stifle overall wage growth remains to be seen, especially as the boost to the minimum wage can also prompt calls for a raise further up the pay scale.

“Inflation may be lower, but it still exists and is fundamental to the thinking behind current fiscal policy and we still have a shortage in the available labour pool.

“Ultimately, economic growth is dependent on a number of factors of which salaries are a small, but significant, part.

“Of course, government budgets seek economic growth and consider how to distribute the consequent wealth. This is not a tax giveaway budget, but it will likely have a strong tendency to take away something from someone, somewhere in the end.”

Kevin Fitzgerald, UK MD, Employment Hero

“The UK’s 5.5 million small businesses are the losers in this budget, as they will be the ones forced to fund the minimum wage rise and the National Insurance increase. While it will be easier for larger organisations to respond and grow, a business with a dozen employees looking to expand is being all but commanded to stop hiring.

“It is well known that the ‘job taxes’ like the change to National Insurance end up largely passed onto workers, so this pain will ultimately be passed onto employees. Workers will undoubtedly be asked to do more as employers cannot afford to hire the help they need, leading to poorer productivity and a rise in stress and burnout. Employment Hero research shows burnout already impacts – these changes will just exacerbate this.”

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