On 30 October 2024, Chancellor Rachel Reeves delivered the UK’s Autumn Budget, marking the first Labour Party budget in over 14 years. This budget introduces important fiscal measures that aim to reshape the economic landscape, with profound implications for businesses both within the UK and internationally.

Here we will discuss the UK Autumn Budget 2024 in detail and understand how it impacts businesses across the globe. Let’s start! 

Economic Context and Government Spending

The Office for Budget Responsibility (OBR) is the independent watchdog for public finances in the UK. The OBR is responsible for producing the official forecasts for the economy as well as the public finances used by Rachel Reeves, the Chancellor. 

Soon after the Chancellor finished announcing the UK Autumn Budget 2024, the OBR updated its forecasts and projected modest economic growth over the next few years. The UK is expected to outpace France and Germany in growth as it benefits from lesser exposure to US tariffs and a strong parliamentary majority, which appeals to investors.

The UK government plans to increase public spending by 2.2% of GDP annually over the next five years. This increase is front-loaded, with day-to-day public service spending set to be 4.8% higher in 2024/25 than in 2023/24. 

The spending will be allocated between investment in transport, housing, research and development, and day-to-day expenditures. This reflects a commitment to address existing spending pressures and fund new policies.

Taxation Changes Impacting Businesses

Here are a few taxation changes that might impact businesses: 

Employer National Insurance Contributions (NICs)

• Rate Increase: The employer NICs rate will rise from 13.8% to 15% effective April 2025.
• Threshold Reduction: The threshold at which employers start paying NICs will decrease from £9,100 to £5,000 per year, broadening the scope of contributions.
• Employment Allowance Adjustments: The NIC Employment Allowance will increase to £10,500, from the previous £5,000 and the removal of the £100,000 threshold will allow more employers to benefit from this relief.

Capital Gains Tax

• Rate Increase: The lower and higher rates of capital gains tax will rise from 10% to 18% and 20% to 24% respectively for all disposals that are made on or after 30 October 2024.
• Carried Interest: The capital gains tax rates applied to carried interest of capital gains will increase from 10% and 28% to 32% and finally 36% in April next year. The rate increase will take place from April 2025. 

Inheritance Tax Reforms

• Pension Wealth Inclusion: Inheritance tax will apply to transferable pension wealth from April 2027, affecting estate planning strategies.
• Revisions to Agricultural and Business Property Reliefs: Changes to Agricultural Property Relief (APR) and Business Property Relief (BPR) will take effect from April 2026, altering the reliefs available for qualifying properties.

National Minimum Wage Adjustments

Effective April 2025, the National Minimum Wage rates will increase as follows:

• National Living Wage (21 and older): Increase to £12.21 per hour.
• 18 to 20-Year-Olds: Increase to £10.00 per hour.
• Under 18 and Apprentices: Increase to £7.55 per hour.

These adjustments aim to enhance living standards but may lead to increased payroll expenses for employers. The retail sector, in particular, anticipates significant challenges due to rising staff costs, compounded by increased energy bills and the shift towards online shopping. 

Measures to Combat Tax Non-Compliance

In this section, let’s take a look at the measures that have been set to combat non-compliance of taxes: 

Umbrella Companies

From April 2026, recruitment agencies or end-client businesses will assume PAYE accounting responsibilities for workers employed through umbrella companies. This measure aims to address tax avoidance and fraud within the labour market.

Mandatory Use of Payroll Software

Employers will be required to use payroll software for reporting and paying tax on benefits in kind, with a phased introduction starting April 2026. This initiative seeks to improve tax compliance and streamline reporting processes.

Sector-Specific Announcements

Here are a few important sector-specific announcements: 

Energy Sector

Energy Profits Levy Increase: The government has announced an increase in the energy profits levy by 3%, rising from 35% earlier to 38% now. This impacts companies within the energy sector. This measure is part of efforts to ensure that energy companies contribute a fair share of tax revenues. The end date of this Energy Profits Levy has also been extended to March 2030. 

Private Education

VAT on Private School Fees: The introduction of a VAT of 20% on private school fees from January 2025 is expected to have significant implications for the private education sector. This change aims to address perceived inequities in the tax system and generate additional revenue. 

Impact on Global Businesses

The UK’s Autumn Budget 2024 introduces several measures that may have implications for international businesses, including those in India:

1. Trade Relations and Tariffs

The global outlook involves rising tariffs and protectionism, necessitating a defence of free trade where UK services can thrive. Businesses engaged in international trade should monitor these developments and adjust their strategies to remain competitive in the evolving trade landscape. 

For Indian companies operating in the UK or trading with UK businesses, changes in taxation, such as the phased increases in Capital Gains Tax and the adjustments to inheritance tax, may require reassessment of cross-border investment strategies and estate planning. 

2. Energy Sector Dynamics

The increase in the Energy Profits Levy could impact Indian firms and firms from other countries with investments in UK energy companies. With renewable energy being a shared priority for both India and the UK, there may be opportunities for collaboration in green energy projects, though higher levies could affect returns on investment. 

3. Labour Market Implications

Changes to National Insurance Contributions (NICs) and the rise in the National Minimum Wage may affect Indian firms with UK-based subsidiaries. Companies relying on skilled or semi-skilled labour in the UK might face increased operational costs, necessitating adjustments in payroll management and workforce planning.

4. Private Education Sector

The introduction of VAT on private school fees might impact Indian expatriates in the UK who choose private education for their children. This could influence decisions around relocation and employment within the UK.

Strategic Recommendations for Businesses

• Evaluate Payroll Impacts: Businesses should model the financial impact of increased NICs and wage rises on their budgets. Early adoption of payroll software to comply with upcoming mandates could streamline compliance.
• Prepare for Tax Changes: Companies and individuals with assets subject to Capital Gains Tax or Inheritance Tax should consult financial advisors to explore mitigation strategies and optimise their tax positions.
• Adapt to Sector-Specific Changes: Firms in energy, education, or related sectors should assess how new levies and tax adjustments could alter profitability and investment planning.
• Plan for Global Trade Shifts: Companies engaged in international trade must stay informed about tariff changes and leverage bilateral opportunities, especially between the UK and India.

Conclusion

The UK Autumn Budget 2024 showcases a pivotal moment in shaping the economic landscape for businesses. With measures targeting fiscal sustainability, tax compliance, and workforce development, the budget highlights the government’s commitment to balancing growth and fairness.

For UK-based and international businesses alike, these changes signal both challenges and opportunities. Strategic planning and proactive adaptation will be critical to understanding the evolving fiscal environment while leveraging new prospects in a globally connected market.

To know more about the impact of budget on UK business, contact GJM & Co. We help you with payroll management, Business Formation, Virtual CFO, Taxation, and more. Schedule a call with us or write to us at  info@gjmco.com.