Business advisors explore what the 2024 Autumn Budget means for SMEs in West Midlands
The 2024 Autumn Budget brings a mix of opportunities and challenges for small and medium-sized enterprises (SMEs) in the West Midlands. While there are measures that provide relief and support, such as the increased Employment Allowance to £10,500 and business rates relief, other changes like the rise in National Insurance contributions to 15 per cent and minimum wage increases could pose challenges.
Additionally, several tax changes were introduced that will impact businesses, particularly in the areas of Inheritance Tax (IHT), Corporation Tax, and Capital Gains Tax (CGT). Business owners, having invested time and money into their ventures, will face higher tax liabilities when selling shares or passing the business to the next generation, especially when there is no cash to cover these taxes.
SMEs will need to navigate these changes carefully, leveraging available support to mitigate costs and capitalise on opportunities for growth and innovation.
Nick Wright, director at Jerroms Miller Specialist Tax, said: “I was pleased to see, after more than 10 years unchanged, positive reform to the EOT legislation as well as maintaining EIS and SEIS regime's which allow early-stage companies to raise valuable finance.
“Retaining BADR lifetime allowance at £1m is also a positive step, however, the rate will increase in April 2025 and 2026 eventually aligning it with the new basic rate of CGT. This is likely to incentivise business owners to sell before 6 April 2025 to ensure they benefit from the current 10 per cent rate.
Changes to inheritance tax will significantly impact local business owners. The reforms to business property relief (BPR) and agricultural property relief (APR) mean that only the first £1 million of combined business and agricultural property will qualify for 100 per cent relief, with the rate dropping to 50 per cent thereafter. This adjustment could create liquidity issues, forcing business owners to sell assets to cover tax liabilities, especially during succession planning.
“The combination of increases to CGT, BADR and restriction of BPR is likely to result in business owners looking to employee ownership as a succession plan. The EOT legislation allows a sale of qualifying shares to a trust for the benefit of employees completely free of CGT with no limits on the amount of relief.”
Kate Moon, tax director at Jerroms: “The rise in National Insurance contributions along with National Minimum Wage will significantly impact many small businesses. It seems the government may not fully grasp the gravity of this, which could have far-reaching consequences for both employees and business owners. For employees, this could mean fewer job opportunities and smaller pay raises, as businesses struggle to absorb the additional costs. For business owners, the increased financial burden might hinder their ability to invest in growth and innovation, potentially leading to difficult decisions such as reducing staff or cutting back on employee benefits.
“Overall, the ripple effects of these changes could stifle economic growth and place additional strain on the small business sector, which is a vital part of the economy.”
SMEs will be assessing the impact of the budget on their affairs and while some benefit from the increases in public spending, for others, especially if an employer or business owner, may feel it necessary to re-group and update their business plans for 2025 and onwards.
Jerroms have a dedicated Budget Hub to help navigate the changes announced, alternatively:
- Read: Autumn Budget In-Depth Analysis
- Read: Headline Announcements
- Watch: Live Reactions & Insights Roundtable
Jerroms experts are on-hand to discuss how these changes affect both individuals and businesses.
