Key Budget Announcements and Practical Actions for Employers

How the 2024 Autumn Budget Impacts Employers: Key Changes, Practical Guidance, and New Insights 

Chancellor Rachel Reeves’ Autumn 2024 Budget introduces significant shifts that small business employers need to prepare for. Alongside increases to the National Minimum Wage (NMW), National Living Wage (NLW), and National Insurance Contributions (NICs), the budget also outlines adjustments to capital gains tax reliefs, fuel duty, and more. Here’s an updated breakdown of the main announcements and practical actions based on the latest information. 

Key Budget Announcements and Practical Actions for Employers 

1. National Minimum Wage and National Living Wage Increases 

From April 2025, the National Living Wage for employees aged 21 and over will rise to £12.21 per hour—a 6.7% increase. Minimum wage increases will also apply across other age brackets, including those aged 18–20, whose rate will rise from £8.60 to £10.00 per hour, and apprentices, who will see an increase from £6.40 to £7.55 per hour. These are some of the largest increases on record, marking a step toward Labour’s goal of a “genuine living wage.” 

Action Steps: 

• Budget for Wage Increases: Assess the impact of these wage increases on your payroll. For businesses relying on minimum-wage staff, the increase may necessitate a review of staffing needs or a focus on operational efficiencies to maintain margins. 

• Plan for Productivity Gains: Consider strategies to boost productivity, such as implementing process improvements or adopting digital tools. These measures can help offset the impact of rising wages on your business. 

2. National Insurance Contributions and Updated Employer Allowances 

The budget confirms that Employers’ National Insurance Contributions will increase by 1.2 percentage points, reaching a rate of 15% from April 2025. In addition, the threshold at which NICs become payable will drop significantly, from £9,100 to £5,000, which will raise payroll costs for many small businesses. However, the Employment Allowance will double from £5,000 to £10,500, allowing more businesses to avoid NICs entirely. 

Action Steps: 

• Adjust Payroll Projections: Calculate how the NIC increase and lowered threshold will impact your payroll and budget accordingly. For businesses affected by these changes, reallocating resources or finding efficiencies in other operational areas can help balance the added costs. 

• Utilise the Employment Allowance: Confirm eligibility for the increased Employment Allowance, which may reduce or eliminate NIC liabilities. This exemption can create breathing room for small businesses facing rising costs elsewhere. 

3. Capital Gains Tax Adjustments and Business Asset Disposal Relief (BADR) Insights 

The budget indicates potential changes to Capital Gains Tax (CGT), including possible increases to CGT rates and adjustments to Business Asset Disposal Relief (BADR). Speculation points to a gradual alignment of CGT with income tax rates, which would increase tax burdens for business owners planning asset sales. The government may also adjust BADR, raising tax rates on gains from business disposals. 

Action Steps: 

• Consult with a Tax Advisor: Business owners planning asset sales or business exits should work with a tax advisor to understand how potential CGT rate hikes or BADR adjustments could impact their financial outcomes. Exploring strategic timing for these transactions may help minimise tax liabilities under current conditions. 

4. Enhanced Capital Allowances and Full Expensing Clarity 

The budget pledges to retain capital allowances and the full expensing regime, allowing businesses to write off qualifying investments in plant and machinery. This support will help businesses invest tax-efficiently, especially as Labour’s corporate tax roadmap includes a cap on corporation tax at 25%. 

Action Steps: 

• Plan Capital Investments Strategically: Schedule investments in qualifying assets, such as equipment or digital infrastructure, to maximise available allowances. Leveraging these allowances can help balance out new costs associated with wage and NIC increases. 

• Monitor Further Updates on Full Expensing: Since Labour has committed to stability on full expensing, keep an eye on potential updates that may expand this to leased assets, which could provide additional tax-saving opportunities. 

5. Worker Classification Compliance and Payroll Adjustments 

The budget introduces stricter guidelines on “false self-employment,” requiring businesses that rely on contractors to review classification criteria. Employers may need to reclassify some contractors as employees, increasing obligations around payroll taxes, benefits, and compliance. 

Compliance Checklist: 

• Review Contractor Arrangements: Conduct an internal audit to determine if current contractor agreements align with new classification rules. Reclassifying certain roles as employee positions may now be required, so consult with HR or legal advisors to assess compliance. 

• Budget for Additional Payroll Costs: For businesses likely to reclassify contractors, prepare for added payroll costs, including NICs and employee benefits. 

Additional Budget Provisions and Suggested Responses 

In addition to direct employer-related changes, the budget includes other policies relevant to small businesses. Here are key updates and actionable insights: 

• Fuel Duty and Transportation Costs: The possible end to the fuel duty freeze could raise operational costs, particularly for logistics-focused businesses. Explore options for more fuel-efficient vehicles or evaluate available subsidies for green technology to offset fuel costs. 

• Late Payment Regulations for Government Contracts: New rules will exclude companies with late payment records from bidding on large government contracts if they fail to pay suppliers within 45 days. Implement clear payment terms and credit policies to avoid disqualification and maintain a healthy cash flow. 

Planning for a Resilient Future with the 2024 Budget 

The 2024 Autumn Budget presents both challenges and opportunities for small business employers. By budgeting for wage and NIC adjustments, leveraging training and capital investment incentives, and ensuring compliance with classification updates, small business owners can position their companies to weather these fiscal shifts. Working closely with advisors and proactively adjusting strategies will help employers navigate Labour’s fiscal policies while maintaining a strong foundation for future growth.