Autumn 2024 Budget
Accredited Supplier, Sones Accountancy Services, display how the recent Autumn Budget from the Chancellor brought several significant changes that will impact businesses, especially those in landscaping and the trades. Below is a breakdown of the updates that will affect the bottom line, from changes in National Insurance to updates on fuel duty and vehicle classifications.
1. Employer National Insurance: Rate Rise
One of the biggest announcements in the Budget was the increase in Employer National Insurance contributions (NICs). From April 2025, the rate for Employer NI will rise from 13.8% to 15%. This change affects all businesses that employ staff, meaning NIC costs will increase for every team member on the payroll. For example, a team member on a £30,000 salary will cost the business approximately £3,750 in NI contributions, up from around £2,884. These additional costs can add up, especially for businesses with larger teams, so planning ahead to manage these increased payroll expenses is essential.
2. Employer’s Allowance Increase: Welcome Relief
To offset the NI rate increase, the government raised the Employer’s Allowance from £5,000 to £10,500. This allowance helps smaller businesses by reducing the total amount of Employer NI they pay. However, the allowance only applies once per business, regardless of team size.
For smaller businesses, this change is good news, as annual NI contributions of around £10,500 or less may mean no Employer NI is due because of this allowance. However, for businesses with larger payrolls, the allowance may cover only part of the additional costs brought by the rate increase.
The increased allowance will provide much-needed relief, but larger businesses with multiple teams or higher-paid staff will still see a noticeable impact from the Employer NI rate rise.
3. Minimum Wage Increase: Higher Wages for Workers
From April 2025, the National Minimum Wage for workers aged 21 and over will rise from £11.44 to £12.21 per hour. For workers aged between 18 and 20, it will go up from £8.60 to £10 and under 18 and for apprentices will go up from £6.40 to £7.55. This change means a higher wage baseline for businesses employing entry-level or junior team members. For example, a full-time worker earning minimum wage will now cost employers an additional £1,600 per year. If a business relies on a team of apprentices or junior staff, this rise in wages will increase payroll costs, making it important to adjust pricing or budgeting to account for this additional outlay.
4. Fuel Duty Freeze: No Change at the Pump
The government announced a continued freeze on fuel duty. With fuel prices already high, keeping fuel duty steady will be a relief for businesses that rely on vans and trucks and face fuel as a significant cost. By keeping fuel duty steady, the government has provided some stability, helping businesses to budget for fuel costs without worrying about an increase.
5. Double Cab Pick-Ups: New Classification as Cars
In a significant shift, double cab pick-ups will be reclassified as cars rather than commercial vehicles from April 2025. This change impacts both the tax on these vehicles and the expenses businesses can claim.
From 1 April 2025, for corporation tax, and 6 April 2025 for income tax, double cab pick-ups will be treated as cars for capital allowances, benefits in kind, and certain deductions from business profits. This reclassification means businesses will no longer be able to claim VAT on these vehicles and may face higher tax charges, as company car tax rules will apply, often a less favourable tax treatment than for commercial vehicles.
For businesses that already own, lease, or have ordered a double cab pick-up before the cut-off date of 6 April 2025, there are transitional arrangements to consider. The Budget Red Book confirms that existing capital allowances treatment will apply for those purchasing double cab pick-ups before April 2025. Additionally, these employers can continue using the previous benefit-in-kind treatment until the earlier of disposal, lease expiry, or 5 April 2029.
Next Steps
With these changes coming up, it is essential to start planning now. Consider the following:
- Review budgets and adjust accordingly for increased payroll and NI costs.
- Consider the double cab pick-up changes - businesses planning to invest in these vehicles before the new rules take effect may benefit from the more favourable, existing tax treatment if purchased before April 2025.
- Plan for pricing adjustments - if necessary, consider small price increases to help cover the higher costs.
By preparing now, businesses can navigate these changes smoothly and continue growing in the coming year. For tailored advice or assistance in planning for the new tax year, contact us to discuss how we can support businesses through these adjustments.