If you’re still wondering what the Budget means for your business, we’re here to help. While some of the big announcements were widely reported, a number of measures were quietly released.
The main takeaway is that doing business will, for many, see costs increasing. But getting everything in order now means your business will be ready for the new rules to be implemented.
So, here’s everything you need to know.
What the Budget means for your business
From the moment Rachel Reeves was announced as Chancellor, she warned there would be tax implications. And it seems business is the most likely to see those changes.
We’ll start with those announcements that you may have missed.
Double-cab pickups
Earlier this year, the previous government performed a U-turn on the classification of double-cab pickups. Such pickups have been classed as commercials for benefits in kind (BiK) tax purposes, which are usually lower.
Rishi Sunak’s government was forced to ditch its plans to class them as cars after backlash from the motor industry. But Rachel Reeves has announced that they will be reclassified.
It means employees using such vehicles will see their BiK tax liability increase from 1 April 2025. Employers are likely to see increases to their NI obligations, too. That’s due to paying additional Class 1A contributions.
Businesses with a fleet of double-cab pickups might consider replacing them with vans when lease deals come to an end.
Making Tax Digital
The government also announced plans to make changes to force more taxpayers to use Making Tax Digital (MTD). It says that anyone with income over £20,000 will fall under MTD by the end of this parliament.
Those with an income from trading or property of more than £50,000 will be required to join by April 2026. Those with income between £30,000 to £50,000 are likely to be required to join the following year. Anyone with income over £20,000 will follow later.
Self-employment groups are lobbying against this because of the costs involved. As well as quarterly reporting costs, there will need to find money for additional fees for compliant software.
Business rates relief
The hospitality industry was given a 75% discount (up to £110,000) on business rates during the Covid pandemic. That discount will be slashed to just 20% from 1 April 2025.
Rachel Reeves confirmed the government’s pledge to review business rates. It plans to look at measures to permanently lower business rates multipliers for retail, hospitality and leisure properties.
National Insurance
Employers will be paying more in National Insurance Contributions (NICs) from April 2025. Employers’ NI will rise by 1.2 percentage points to 15% from the start of the new tax year.
The threshold that businesses start paying NI on a workers’ wages was also lowered. That means paying NI on earnings of £5,000 rather than the current £9,100.
To support smaller businesses, employment allowance will increase from £5,000 to £10,500. It means you pay less Class 1 National Insurance each time you run your payroll until the allowance has gone.
Minimum wage increases
Businesses will not only face increasing NI costs, but paying more in wages. From April 2025, the national living wage for those over 21 increases by 6.7% to £12.21 an hour.
Workers aged 18 to 20 will see their minimum wage rise from £8.60 to £10. That’s a staggering 16.3% increase! Apprentices will also receive a pay rise from £6.40 to £7.55 an hour.
Capital Gains Tax
From April 2025, Capital Gains Tax (CGT) on carried interest will increase to 32%. CGT on general assets will rise from 10% to 18% for the lower rate. The higher rate increases from 20% to 24%.
Business Asset Disposal Relief
This was known as entrepreneurs’ relief. Currently, Business Asset Disposal Relief (BADR) tax is set at 10% on exit takings for startups when founders sell their business for £1million or less. This will rise to 14% from April 2025 and 18% from 2026-27.
Many startups are threatening to leave the UK to avoid paying more tax when they sell their business.
Umbrella companies
An umbrella company is one that employs contractors who work on temporary contract. The company manages how freelance workers get paid by their end client or by recruitment companies. They are used to simplify taxes and help avoid worker misclassification.
Rachel Reeves promised to clampdown on umbrella companies that exploit workers. She plans to tackle non-compliance by making recruitment agencies responsible for accounting for PAYE on payments from April 2026.
If an agency isn’t involved, this will fall on the end client’s business. Organisations representing freelancers are worried this will mean sub-contractors will lose out due to the extra work on costs involved.
What do I need to do?
If you need to plan to cover increasing costs and want to budget for your business, contact our team today.
