Autumn budget 2024: changes affecting companies and investors

The Chancellor of the Exchequer, Rachel Reeves, announced the Labour government’s first budget in 14 years. This article will highlight the changes that affect startups and investors.

Corporation Tax Rates and Reliefs

The rate of corporation tax will be retained at 25%. No changes are expected to the small profits rate, which reduces the rate of corporation tax for businesses with annual profits less than £50,000. Full expensing will be retained.

The Chancellor also announced that there will be no change to R&D tax credit rates.

Changes to HMRC

There have been widely reported issues that dealing with HMRC has become more difficult and this has partly been blamed on HMRC staffing levels and resourcing. The Chancellor today announced that funding would be provided to HMRC to:

• Recruit 5,000 more compliance staff
• Update to HMRC IT systems
• Increase in penalty interest
• Stop promoters of tax avoidance schemes

There will also be a rise in the rate of late payment interest on unpaid tax liabilities by 1.5% from April 2025.

Employers’ NIC

Employers’ National Insurance Contributions (‘NIC’) is a tax paid by employers as a proportion of an employee’s salary. The Chancellor announced the following changes to employers’ NIC:

This is balanced by increasing the rate of employment allowance from £5,000 to £10,500.

You can include a proportion of your Employers’ NIC costs if you make a claim for R&D tax relief.

Capital Gains Tax (CGT)

Capital Gains Tax (‘CGT’) is tax paid on the sale or disposal of assets, including shares. The Chancellor announced that the rates of CGT will rise as follows:

Business Asset Disposal Relief (BADR) and Investors’ Relief (IR)

Business Asset Disposal Relief (BADR) and Investors’ Relief (IR) are special CGT reliefs that currently allow certain business owners and investors to pay a reduced rate on profits from selling their business assets or shares. They will increases in phases:

Starting from April 6, 2025: The tax rate for both BADR and IR will increase to 14% from current 10%
Starting from April 6, 2026: The rate will increase again to 18%, which will match the main lower CGT rate.

SEIS/EIS and VCT

The Chancellor also announced that the Seed Enterprise Investment Scheme (SEIS), the Enterprise Investment Scheme (EIS) and Venture Capital Trust (VCT) scheme will continue to be extended to 2035.

National Minimum Wage Rise

The Chancellor announced that the rates of National Minimum Wage (‘NMW’) and London Living Wage will rise as follows:

You’ll have to ensure that you meet these National Living Wage requirements if you hire staff or third party workers (such as agency staff). This could make your payroll costs more expensive.

As a business, you must remain compliant with the NMW regulations or you could receive a fine of up to £20,000.