Autumn Budget 2024: Investment and Stability, But the Burden Falls on Businesses

In the first Budget of the new Labour government, the Chancellor, Rachel Reeves, outlined several bold measures that she hopes will bring economic growth, stability and investment to the UK.

The Chancellor announced a new ‘stability rule’ – that routine expenditures should be fully funded by revenues, eliminating the need for borrowing to cover these costs – and an ‘investment rule’ – that aims to reduce net financial debt (defined as public sector net financial liabilities) as a proportion of GDP. If these measures increase the Chancellor’s ability to invest, then they are welcomed.

The Chancellor also announced short-term tax raising measures predicted to be worth around £40bn.

Positively, it was good to see the government trying to create some certainty regarding the UK’s corporate tax regime with their new corporate tax roadmap.

In previous fiscal statements, the rates of corporate taxation have often been subject to change at short notice, which caused uncertainty for business owners who needed certainty when making future spending decisions.

It was also good to hear that the Chancellor intends to increase personal tax thresholds on income tax and national insurance in line with inflation from 2028-29, which removes fiscal drag, or as we’ve previously called it, the boiling frogs approach to taxation.

However, while working people largely avoided direct tax increases, at The Uncommon Practice we’re on the side of business owners, and there’s no getting away from the fact that the burden of this Budget will predominantly fall on the shoulders of businesses.

As a result, it will remain to be seen whether the measures outlined will provide the boost to the UK economy that is hoped.

In particular, an increase in employers’ national insurance contributions, combined with increases to the national minimum wage will be difficult for many business owners to swallow.

As the Institute of Chartered Accountants in England and Wales (ICAEW) suggested: “The OBR forecast predicts very little change to productivity in the medium term and there are questions over whether some of the tax increases set out in the Budget might hold back investment, employment or wage increases.”

To be clear, we support a rise in the national minimum wage. There are many positive benefits to the economy and society when workers receive a fair wage for their labour.

But these are significant cost increases for businesses, and it remains to be seen how these costs will impact business growth and investment choices. Will businesses choose to raise prices for customers, employ fewer people, or even be forced to lay workers off?

Yes, the rise in the employment allowance will mitigate some of the employer national insurance rise for smaller businesses – 865,000 employers will not pay any NI at all next year – and business rates support for retail, hospitality and leisure businesses should be welcomed, but if workers do end up taking the brunt of the cost increases, and businesses suspend investment decisions, then the measures will clearly not have had their desired effects.

Our advice to business owners?

Start planning for these increase costs NOW!

The vast majority of the measures announced by the Chancellor do not come into force until April 2025, which crucially gives businesses some time to prepare.

In particular, with the announced increases in business costs, business leaders will need to be very clear about their cash flow forecasts and make sure that they budget accordingly in the months before these changes take effect. You must have clear management information and forecasting that supports your decision making.

We urge any business owner, whether you are a client of The Uncommon Practice or not, to contact us without delay if you would like our support to produce cashflow forecasts for the months ahead. Similarly, if you want improved management information and financial data that supports your strategic decision making, contact us to find out how we can help.

Our accountants can also help you to calculate your national insurance cost increases accurately, so you can start to plan for the additional expense.

Finally, from a practical perspective you will need to make sure that your payroll adjusts to these changes. If your payroll is managed by The Uncommon Practice, this will be taken care of for you. If it is not, get in touch to find out how we can take this administrative burden away from you.

We’ve outlined the key Autumn Budget measures that will affect businesses in greater detail here.

If you have a question about any of the changes outlined below, please contact The Uncommon Practice and we will be happy to help.