The Chancellor’s Business Tax Changes Explained: What Small Businesses Need to Know

As we approach the end of 2024, small businesses in the UK are eagerly awaiting the Autumn Budget to see what changes will be made to business taxes. With the economy still recovering from the effects of the pandemic, there has been much speculation about what the Chancellor will announce. And now, the wait is over.

In this article, we will break down the key business tax points from the 2024 Autumn Budget and explain how they will impact small businesses in the UK. So, if you’re a small business owner or an SME, read on to find out what you need to know.

Corporation Tax

One of the most significant changes announced in the Autumn Budget is the increase in Corporation Tax. From April 2025, the rate will rise from 19% to 23%. This means that businesses with profits over £250,000 will see an increase in their tax bill.

While this may seem like bad news for small businesses, it’s worth noting that the rate will remain at 19% for companies with profits under £50,000. This is good news for micro-businesses and startups, as they will not be affected by the increase.

However, for businesses with profits between £50,000 and £250,000, there will be a tapered increase in the Corporation Tax rate. This means that the rate will gradually increase from 19% to 23% as profits increase. This is a fair approach that will help support growing businesses while still generating much-needed revenue for the government.

VAT Threshold

Another change that will affect small businesses is the VAT threshold. Currently, businesses with a turnover of £85,000 or less are exempt from registering for VAT. However, from April 2025, this threshold will be reduced to £70,000.

This means that more small businesses will be required to register for VAT and charge their customers VAT on their goods and services. While this may seem like an added burden for small businesses, it’s important to remember that VAT is a tax on consumption, not profits. So, if your business is VAT registered, you can claim back any VAT you pay on your business expenses.

Employment Allowance

The Employment Allowance is a relief that allows businesses to reduce their National Insurance contributions by up to £4,000 per year. However, from April 2025, this allowance will only be available to businesses with an employer National Insurance bill of less than £100,000.

This change will mainly affect larger businesses, but it’s worth noting for small businesses that may be planning to expand and hire more employees in the future. It’s also worth mentioning that the Employment Allowance will be extended to cover employer National Insurance contributions for apprentices under the age of 25.

Business Rates

Business rates have been a hot topic for small businesses in recent years, with many struggling to keep up with the high costs. In the Autumn Budget, the Chancellor announced a freeze on business rates for the next two years, providing much-needed relief for small businesses.

In addition, the government will be conducting a review of the business rates system, with the aim of making it fairer and more reflective of the current economic climate. This is a positive step towards supporting small businesses and ensuring they are not burdened with excessive costs.

Entrepreneurs’ Relief

Entrepreneurs’ Relief is a tax relief that allows business owners to pay a reduced rate of Capital Gains Tax when they sell their business. However, from April 2025, this relief will be replaced with a new Business Asset Disposal Relief.

Under this new relief, business owners will still be able to pay a reduced rate of Capital Gains Tax when they sell their business, but the conditions for eligibility will be stricter. This change is aimed at preventing abuse of the relief and ensuring it is only available to genuine entrepreneurs.

In Conclusion

Overall, the 2024 Autumn Budget has brought some significant changes to business taxes in the UK. While some may see these changes as a burden, it’s important to remember that they are necessary for the government to generate revenue and support the economy.

As a small business owner, it’s essential to stay informed about these changes and how they will affect your business. Seek advice from a financial advisor or accountant to ensure you are prepared for any changes and can make the most of any available tax reliefs.

At Small Business UK