Autumn 2024 Budget Breakdown for Start-Ups & Scale-Ups

Earlier today Chancellor Rachel Reeves delivered the 2024 Autumn Budget to the House of Commons. This was the first UK Budget delivered by a Labour Chancellor in 14 years. A highly anticipated and rather controversial Budget announcement, which was preceded by a fair amount of kite-flying, which of course resulted in swinging public opinion ahead of the Budget delivery.

The Chancellor has previously blamed her Conservatives predecessors for a £22bn “black hole” in public finances as she continued doing during the Budget Announcement, warning of tough decisions having to be made in the upcoming budget. She then went on to say that there will be no return to Austerity, while Prime Minister Keir Starmer has pledged to “rip out” bureaucratic hurdles that are currently blocking UK investment.

During PM Questions ahead of the Budget announcement, former Prime Minister Rishi Sunak underlined the lack of focus from the Labour Party on tech and innovation, urging the majority party to “continue to support emerging British tech businesses and establish our country as the home to AI growth and innovation”.

The Prime Minister also remarked, shortly ahead of Reeves’s announcement, that the main focus of this Government’s Budget is in fact growth. In her very opening statement, Chancellor Reeves said: “The only way to drive economic growth is invest, invest, invest. There are no shortcuts, and to deliver that investment, we must restore economic stability.”

Here is our breakdown of today’s Budget Announcement, with a focus on its effects on Britain’s high-growth businesses, start-ups and scale-ups.

Employer NICs Increase

Of course, the headline measure announced in today’s budget was the 1.2% rise in Employers NICs, as well as the reduction of Employer NIC’s secondary threshold from £9,100 to £5,000 (this is the salary rate above which Employers Class 1 NICs are calculated). The Office for Budget Responsibility estimates would bring £25bn per year into the public finances.

In order to protect small business owners the Employment Allowance will increase from £5,000, to £10,500. With the removal of the existing £100,000 eligibility threshold for Employment Allowance, this means that 865,000 employers will pay no NICs next year, and more than half of employers with NICs liabilities will either see no change or will gain overall next year. There are currently some exceptions to Employment Allowance eligibility, including for companies whose sole employee is a director.

However, this does mean that the cost of hiring and paying employees in the long term will increase—especially so for growing companies whose headcount is steadily rising—hitting not only the large corporations that the Labour Government’s policies intend to target, but small business owners and entrepreneurs as well.

Capital Gains Tax (CGT) Regime Reform

Chancellor Reeves decided to increase the lower rate of Capital Gains Tax from 10% to 18%, and the higher rate from 20% to 24%. These new rates will match the residential property rates, which are left unchanged. This will apply to disposals made on or after 30 October 2024.

The reduced CGT rate with Business Asset Disposal Relief (BADR) will remain at 10% until the end of the financial year, then increase to 14% in April 2025 and to 18% in April 2026 to match the lower CGT rate. The same will apply to Investors Relief. Furthermore, the lifetime limit for Investors’ Relief will be reduced to £1 million starting today, to match the BADR lifetime limit.

Schemes such as SEIS, EIS, the Venture Capital Trust Scheme (VCT) and EMI Share Options, which allow the reduction or deferral of CGT are expected to remain unchanged (in fact EIS and VCT were recently renewed until 2035). While this is not specified, where the CGT reduction was previously equal to the current BADR level of 10%, this will rise in line with BADR to 14% and then 18%.

As a side note to the CGT regime restructuring, carried interest—a performance fee earned by partners in private equity and venture capital funds—will no longer be taxed via CGT, but will follow the Income Tax regime starting April 2026. Until then, its CGT rate will be increased to 32%.

Freezing of Tax Threshold to Cease From 2028

It had been highly rumoured that the Labour Government would extend the freeze to Income Tax thresholds to 2030 to raise additional funding from taxpayers without triggering an increase in tax rates, which they promised not to do.

However, Chancellor Reeves announced that from 2028-29 personal rate tax thresholds will begin increasing again, in line with inflation.

Increase to National Living Wage

As was confirmed ahead of Budget day, the National Living Wage will increase from the current rate of £11.44 per hour to £12.21 per hour for 21-year-olds and above, a 6.7% rise.

Chancellor Reeves reiterated how this will “put money in working people’s pockets”, however employers and trade groups told the BBC that the rise was “higher than expected” and implied that this might result in layoffs, or at least in the loss of potential jobs, especially paired with the Employer NICs increase, as businesses struggle to cope with the higher cost of employment.

As part of a plan to move to a single Adult National Living Wage, the 18-20 Year Old Rate will initially rise by £1.40 to £10.00 per hour, the 16-17 Year Old Rate and the Apprentice Rate will increase by £1.14 to £7.55 per hour.

The Corporate Tax Roadmap

The Government has published a Corporate Tax Roadmap detailing their plans for taxing businesses and all the business-related capital allowances and schemes.

The good news here is that the Government is planning to retain all existing Capital Allowances, while possibly tweaking the eligibility criteria for some of them.

In particular, the document specifies that: “The government is committed to maintaining the generosity of the rates in both the merged R&D Expenditure Credit (RDEC) scheme and the Enhanced Support for R&D Intensive SMEs. Combined with the commitment to cap the Corporation Tax rate, companies doing qualifying R&D will continue to receive a cash value of between £15 to £27 for every £100 spent on R&D.”

This Roadmap also includes commitments to:

• capping the Corporation Tax Rate at 25%;
• maintaining the Small Profits Rate and marginal relief at current rates and thresholds;
• maintaining Full Expensing;
• maintaining the Patent Box.

Abolition of Non-Dom Tax Regime

Rachel Reeves has pledged in her speech to closing loopholes in the tax system.

This includes the full abolition of the non-dom tax regime which will be replaced with a new, residence-based system which ensures that anyone who has their residence in the UK pays British taxes. To ensure this, the Government will delete the notion of domicile from the tax regime completely starting in April 2025.

Business Rates, Alcohol Levy, Soft Drinks Levy and Fuel Duty

Reeves pledged to introduce permanently lower business rate multipliers for high-street retail, hospitality and leisure properties (RHL) from 2026-27, while increasing the multiplier for the most valuable properties. Until then, the small business multiplier will be frozen, and RHL businesses will receive a 40% relief up to £110,00.

In support of pubs smaller brewers, Labour is cutting alcohol duty on draught products by 1.7%—the equivalent of 1p per average pint—from February next year, reducing it by 1 penny per average strength pint. Alcohol duty on non-draught products will increase in line with Retail Price Index (RPI) inflation from the same date.

At the same time, the Soft Drinks Industry Levy will increase over the next five years to account for inflation since it was last updated in 2018, and the duty will also rise in line with inflation every year going forward.

Reeves announced a further freeze of fuel duty and an extension to the temporary 5p cut for one year, at a cost of £3 billion next year. To help usher the UK into a carbon-neutral era, the rate of the Energy Profits Levy (EPL) will increase from 35% to 38%, removing the 29% investment allowance, and extending the levy until 31 March 2030. However, 100% first-year allowances in the EPL will remain and the government will consult in early 2025 on how the oil and gas tax regime should respond to price shocks once the EPL ends in 2030.

Inheritance Tax

The current inheritance tax thresholds are due to be frozen until April 2028, and the government is extending these threshold freezes for a further two years to April 2030.

The government is making the inheritance tax system fairer by applying inheritance tax to unspent pensions pots and restricting the generosity of agricultural property relief and business property relief for the wealthiest estates.