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The BAS 2024 Budget Update

Nov 1, 2024 | Accounting, Business Advice, Local Business, Tax, Uncategorised

Sian Smith

The BAS 2024 budget update was written by Brett Smith:

This is the first budget update I’ve done under any labour government… and I don’t know if it’s me getting old, or being grumpy in the long dark evenings but I’ve got to say it’s probably the worst budget I’ve experienced. However, that is from a personal perspective and not necessarily reflective of how it impacts our clients.

So, let’s explore some of the announcements in more detail:

Employer NI

We’ll start at one of the biggest announcements – the increase in the rate of employer’s NI from 13.8% to 15%. This is also coupled with a drop in the level at which you start paying employer’s NI from £9,100 to £5,000 but offset by an increase in the employer’s NI allowance from £5,000 to £10,500.

For many businesses the increase from £5,000 – £10,500 is fantastic. A lot of businesses will benefit by saving this extra £5,500, but let’s take a look at that in more detail.

Businesses who are already paying less than £5,000 will be unaffected by this, even after the increase in NI rates and decrease in levels. Any business still paying NI over £5,000 (but below the new level of £10,500) will obviously save NI, but maybe not as much as you think. £10,500 sounds like a sensible sized allowance, and to many it is, but you only need to have 3 employees earning £28,500 before that £10,500 is wiped out. And a business with 2 employees earning £27,000 already pays no NI. So, there is a very narrow band of businesses that will actually benefit from these changes. Also worth briefly noting for our employer’s out there that an employee on a salary of £30,000 will now cost you an extra £865.80 a year to employ than it currently does.

Whilst there have been no changes announced to income tax and individual NI, this change to employer’s NI will have a negative impact on a large proportion of small businesses who are family-owned or owned by a small number of individuals. Following on from the increase in Corporation Tax rates in the last couple of years, again where the definition of small by the government has been hugely understated, it seems that small, limited companies are an easy target for both Labour and Tories alike.

Business Asset Disposal Relief (BADR)

Further pain for business owners follows in that the rate of BADR is also to be increased from 10% to 14% as of 6th April 2025, with a further increase to 18% from 6th April 2026. This is the rate of tax on which business owner’s pay tax on the sale of their business which is set to slowly keep up with the lowest rate of Capital Gains Tax (more on that in a minute).

These changes have already sparked questions from business owners who have started to wonder what the benefits of being a business owner is anymore… Meanwhile the rates of income tax have stayed the same, and employee NI has fallen in recent years – so, the eager eyed business owners may be looking at these changes as an expectation for them to pay for the shortfall in individual National Insurance Contributions.

Capital Gains Tax (CGT)

In other news, as expected, the general rate of CGT will be increasing to fall in-line with current rate of CGT on residential property not covered by private residence relief (i.e. the sale of a let property). This will increase from 10% at the basic rate to 18%, and from 20% at the higher rate to 24%.

As mentioned, this is a change to the rate applied to gains which are NOT residential property. Based on experience with clients this is most likely to be applied to the sale of shares in a portfolio. Also note that the annual exemption remains at £3,000 for 2025-2026.

Double-Cab Pick-Ups

Some of you may remember earlier this year that HMRC tried to change double-cab pick-ups with a load of over 1 tonne to cars instead of classifying them as commercial vehicles (under 1 tonne would already be classed as a car). This has an impact on reclaiming VAT, the rate of capital allowances, and for companies, the value of any personal tax benefit (Benefit-in-Kind). This was swiftly reversed after some uproar, mainly from the farming community.

Well… this has been snuck in again in this budget – one announcement that they didn’t shout from the rooftops.

What this means moving forwards is that any double-cab pick-up purchased from April 2025 onwards will now classify as a car, and without going into the technical detail, this is not good news from a tax perspective.

If you are considering purchasing or leasing a double-cab pick-up in the near future, I would recommend contacting us to discuss this in more detail – there are too many considerations to note down in one “quick” budget update.