What the autumn budget means for small businesses

National Insurance hike

The most significant change for businesses of all sizes is the increase in employer National Insurance contributions by 1.2% to 15% from next April. In addition, the threshold at which employers will need to start paying NI on each employee’s salary is dropping from £9,100 to £5,000.

This change could potentially have a huge impact on small businesses, who may find they either need to reduce their headcount or reduce the hours their staff work in order to factor in these new costs.

Employment Allowance more than doubled

Employment Allowance is a government initiative which allows businesses to reduce their National Insurance bill, and the good news is this has been raised from £5,000 to £10,500 for the next financial year.

However, not everyone is eligible for Employment Allowance. It can only be claimed if your business has a NI bill of less than £100,000 and it does not apply to businesses with only one employee, who is a director. So, if you are a sole director company, unfortunately you won’t be eligible, and you’ll end up paying significantly more in employer’s national insurance. Of course, you could consider adding someone to the payroll and paying them just enough, so you can claim Employment Allowance, but this may not be a viable option for your business.

As Employment Allowance isn’t something that’s automatically applied, it’s worth checking whether you are eligible and how you go about claiming it.

Increase to National Living Wage

Also coming into force in April 2025 is a 6.7% increase in National Living Wage to £12.21 an hour as well as an increase in the National Minimum Wage for under 21-year-olds to £10 an hour.

While this is great for workers, it obviously puts extra pressure on small businesses, especially those in the hospitality sector who often rely on young people to keep their business going.

These increases along with the changes to NI contributions will see many businesses needing to take a hard look at their expansion and hiring plans.

Permanent relief on business rates

One slice of good news is from 2026-27 permanently lower business rates for retail, hospitality and leisure properties will be introduced when the current 75% discount expires in April 2025. The new permanent discount will be 40%, up to a maximum of £110k per company.

In addition, the small business multiplier for all properties where the rateable value is less than £51,000 will be frozen 49.9p into 2025/26.

Plan ahead for April 2025

With R&D relief remaining in place, and fuel duty being frozen for another year, there are some positives for small businesses to come out of the budget, but not as many as anticipated.

Many of these changes might be alarming, so we recommend you take the time to understand how these changes affect your business, impact your profitability and reevaluate your financial plans so you’re ready for April next year.

If you do need any help with planning for these changes, please get in touch and we’ll be happy to talk through the best options for you and your business going forward.

Breaking even – checking the numbers

In previous newsfeeds we have described how you can calculate the level of turnover you need to create in order to meet all your costs whether they be fixed costs (rent, rates etc.,) or variable costs (goods you need to buy to convert into goods you sell).

For example, if your fixed costs are £50,000 per annum and your variable costs are 25% of your turnover, the annual turnover you need to breakeven will be £200,000. The formula is:

Annual fixed costs divided by 25 (the gross profit)

Bereavement Support Payment

The amount of Bereavement Support Payment you can claim will depend on your relationship to the person who died and when you make your claim.

Your payments will be paid into your bank, building society or credit union account.

If you were married or in a registered civil partnership with the person who died

If you were receiving Child Benefit when your partner died (or did not get it but were entitled to it), you will get the higher rate.

This is made up of:

a first payment of £3,500;

Tax codes for employees

The P9X form is used to notify employers of the tax codes to use for employees. The latest version of the form has been published and shows the tax codes to use from 6 April 2023. The form states that the basic personal allowance for the tax year starting 6 April 2023 will, as expected, be £12,570 (£12,570 in 2022-23) and this means that the tax code for emergency use will remain at 1257L.

The basic rate limit will be £37,700 (£37,700 in 2022-23) except for those defined as Scottish taxpayers

Properties not let at commercial rates

There are special rules where a property is let at less than a commercial rate or isn’t let on commercial terms. These rules also apply if a property is occupied rent free or at less than a commercial rate, for example, a property is occupied by a family member at a reduced or nil rent.

In these circumstances, HMRC can take the view that unless the landlord charges a full market rent for a property and imposes normal market lease conditions, it is unlikely that the expenses of the property are