Chancellor Rachel Reeves introduced measures to reflect the government’s emphasis on sustainable growth and fair wages. The overall impact requires SMEs to plan for the future even more …
Certainly the headline figures about the increase in employer’s NI and the National Living Wage, together with the reduced thresholds, will result in rising staff costs. The government included an increase to the Employment Allowance, which is expected to exempt around 865,000 businesses from NI costs. However, many SMEs will face pressure to adapt, potentially by adjusting prices or restructuring operations to absorb these increases.
The budget also alters the tax landscape. Capital Gains Tax (CGT) rates will rise as will the Business Asset Disposal Relief. These changes may impact SME owners planning to sell business assets or personal investments, as they could see higher tax liabilities.
For property-related expenses, businesses in retail, hospitality, and leisure will benefit from permanent business rate relief, replacing the current 75% discount with a new 40% relief cap of £110,000 per business. The corporate tax rate is held at 25% for this parliament, supported by a roadmap that promises stability in capital allowances and research & development (R&D) reliefs. This stability is key for SMEs looking to innovate and expand.
The freeze on fuel duty and extension of the 5p cut until March 2026 is a welcome relief, especially for businesses reliant on transport.
Although these measures offer some financial relief, the budget overall presents higher costs for SMEs, particularly around wage and tax obligations. Concerns have been voiced that these measures could hinder growth and operational stability, suggesting that businesses may need to explore cost-saving strategies to navigate these changes effectively.
Access to capital was another area of focus, with new funding pools and loan programs specifically aimed at SMEs, together with increased funding for business advisory services, offering SMEs access to mentorship, market analysis, and strategic planning support. This guidance can be invaluable for small businesses navigating complex regulations and shifting consumer demands.
Digital transformation was also a major theme in the 2024 budget as governments push for modernisation. On the one hand there was provision for digital adoption, including subsidies for digital training and grants for purchasing software and cybersecurity tools, which can increase efficiency and competitiveness. On the flip side, HMRC will be updating their processes and systems, potentially moving to increased quarterly reporting – will this result in more quarterly payments?
So many initiatives were included in the 2024 Budget … Businesses should assess the new landscape and update their cashflow forecasting. Active planning will be required! Draw on the specialist knowledge of those supporting your business in this arena – your accountant, your finance broker – to ensure you explore all the options as available to you.