Here's an overview of how the Autumn Budget will impact small to medium-sized businesses
National Insurance Increase:
Employers' contributions will rise by 1.2% to 15% in April 2025, with the threshold lowered from £9,100 to £5,000. This will lead to higher payroll costs, particularly affecting SMBs with larger staff numbers.
Minimum Wage Rise:
The National Living Wage will increase to £12.21, raising annual labour costs. This will impact SMBs in labour-intensive sectors like hospitality and retail, which may need to adjust staffing or pricing.
Business Rates Relief:
Retail, hospitality, and leisure businesses will see permanent reductions in business rates from 2026-27, with a 40% relief cap of £110,000 until then. This will provide some financial relief, though larger SMBs may be less affected by the cap.
Employment Allowance:
Increased from £5,000 to £10,500, this allowance will reduce National Insurance liabilities for smaller businesses, easing the cost of employing staff and supporting growth.
Abolition of Non-Dom Status:
From April 2025, this could deter wealthy investors, potentially reducing available capital for SMBs reliant on non-dom funding. Such businesses may need to seek alternative funding sources.
Carried Interest Tax Increase:
The tax on carried interest will rise from 28% to 32%, potentially reducing private equity investment in SMBs. Businesses may need to explore other funding options, such as grants or partnerships.
Summary:
The Autumn Budget presents both challenges and opportunities for SMBs. Higher National Insurance contributions and a minimum wage increase will significantly raise labour costs, particularly for labour-intensive sectors like hospitality and retail. Smaller businesses will need to adjust their financial plans, optimise staffing, and perhaps review pricing strategies to manage their profitability.
On the positive side, business rates relief and an increased employment allowance will help offset rising costs, especially for smaller businesses. However, the abolition of non-dom status and increased carried interest tax may make accessing investment more challenging, particularly from overseas or from private equity. Exploring different funding sources, like government grants or partnerships, will be key to managing these changes effectively.
