Pre Budget Tax Update

As the 30 October 2024 budget approaches, small businesses should be preparing for potential tax changes that could significantly affect their finances. While the full details won’t be known until the official announcement, speculation is growing around key measures that businesses, especially directors, need to consider in advance. One of the key areas of focus is the introduction of employer National Insurance on employer pension contributions, but there are other important considerations too. 

National Insurance on Employer Pension Contributions

One of the most significant expected changes is the introduction of employer National Insurance on employer contributions made to employees’ pension pots. This measure could raise around £15bn for the government, reversing part of the National Insurance relief given in previous budgets. This change would directly impact businesses that make pension contributions for their employees, including directors making large contributions to their own pensions. 

What to consider:  

If you are a director or employer making substantial pension contributions, you may want to accelerate those contributions before the budget is announced. Doing so could help you avoid the increased costs that may come from the introduction of employer National Insurance on employer pension contributions, which could take effect shortly after the budget. 

Potential Changes to Capital Gains Tax 

Earlier reports suggested there might be a large hike in Capital Gains Tax (CGT) to equalise it with income tax rates. However, the latest information indicates this plan is unlikely to happen. Instead, a more modest increase is expected, with the basic CGT rate rising from 20% to around 24%. This change aims to maximise revenue while avoiding excessive tax avoidance, but it will still result in higher tax bills for those selling assets. 

What to consider:

If you are planning to sell assets, particularly within your business or investment portfolio, it may be wise to complete any sales before the budget. Acting now could help you avoid paying the higher CGT rate. 

Fuel Duty Rise

There is growing speculation that the 5p cut in fuel duty, introduced in 2022 and extended until March 2025, may be scrapped in this budget. According to the RAC, fuel retailers have failed to pass on the benefit of lower fuel prices, and it is expected that Chancellor Rachel Reeves will reintroduce the full duty to recoup around £2bn per year for the Treasury. 

What to consider: 

If your business relies heavily on transport or fuel, consider filling up vehicles or purchasing fuel in bulk before the budget announcement, as a rise in fuel duty could increase operational costs in the near future. 

Impact on Local Authorities and Spending

Although government spending is expected to rise by 2% to 3%, many local governments may still face budget shortfalls. Businesses that rely on local authority contracts or services may experience continued instability in funding. 

What Small Businesses Can Do Now: 

– Review employer pension contributions: Consider making large contributions before the budget to avoid potential National Insurance costs. 

– Reevaluate capital gains: If you’re planning to sell assets, acting before the budget may save you from higher CGT rates. 

– Fill up on fuel: If you rely on transport or fuel, consider filling up your tanks or purchasing fuel now to avoid any potential price hikes. 

– Stay informed: As the budget unfolds, it will be critical for businesses to stay updated on new taxation measures and adjust their strategies accordingly. 

A Word of Caution 

Please note that all of this remains speculative until the budget is officially announced. While preparing in advance is always wise, the exact details of these tax changes may differ from what we think might happen. We will be post a budget update shortly after the 30th following the official budget release. 

In the meantime if you would like to talk to us about becoming a client please contact us:

Livingston Accountants

Edinburgh Accountants

Glasgow Accountants