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As we approach the end of another financial year, business owners are busy planning for the year ahead. Whether your business runs on a financial or calendar year, one thing is certain – budgeting for 2025 is, or should be, top of mind. With the Autumn Budget 2024 introducing another layer of complexity, there are a few key changes that could impact your cash flow, taxes, and overall strategy. To help you navigate these obstacles, in this article I’ve outlined key points along with my 2025 budgeting tips to help you prepare for next year. So, let’s get started…

The Autumn Budget 2024: Key Changes that could Impact Your Business

Here’s a breakdown of what to expect:

Increase in Employers’ National Insurance (NICs)

A significant change is the rise in employer NICs, from 13.8% to 15%, effective April 2025. Additionally, the secondary threshold at which employers begin paying NICs will be reduced from £9,100 to £5,000. If you have fewer than five full-time employees on the National Living Wage, this will be less of a concern, but it’s essential you understand how these changes might affect your business cash flow.

However, there is some relief for smaller businesses. The Employment Allowance, which helps offset NICs costs, will increase from £5,000 to £10,500, and the £100,000 eligibility threshold will be removed. This will be a welcome relief for many smaller businesses, helping ease the impact of the increase.

National Living and Minimum Wage Increases

The National Living Wage will increase to £12.21 per hour for employees aged 21 and above, while rates for younger workers and apprentices will also rise. As you plan for 2025, it’s crucial you consider the combined impact of these wage increases and the rise in NICs. While small businesses may benefit from the Employment Allowance, larger businesses will need to prepare for increased payroll costs.

Capital Gains Tax (CGT) Changes

The Chancellor has announced that CGT rates will increase starting in 2025, with the lower rate rising to 18% and the higher rate to 24%. However, there’s good news for those thinking about selling business assets: the Business Asset Disposal Relief remains in place, and it will rise from 10% to 14% in April 2025, with a further increase to 18% in 2026/27. If you’re planning on selling assets, it may be worth considering doing so before the rate increases.

For more details on the effect of this measure you may find this article useful – When to Sell My Business Based on the 2024 Budget Changes.

Support for Retail, Hospitality, and Leisure

This includes permanent lower business rates multipliers for these industries starting in 2026-27. For 2025-26, these sectors will also receive 40% relief on their business rates, up to a £110,000 cash cap. This will provide some financial relief for businesses in these industries, and it’s worth factoring into your budget if you operate in these sectors.

Corporate Tax Rate Roadmap

The government has committed to keeping the corporate tax rate at 25% for the duration of the Parliament. This provides some predictability for businesses and can be useful for your long-term planning and investment decisions.

Here are My 2025 Budgeting Tips to Help You Prepare

1. Understand How the 2024 Budget Affects You Directly

Firstly, it’s important you don’t get lost in the headlines. Take your time to fully understand how it will affect your business. For example, if you have fewer than five full-time employees on the National Living Wage, the rise in National Insurance might not impact you as significantly. Breaking down the budget’s implications will help you plan more effectively.

2. Consider Selling Assets Now

If you’re thinking of selling business assets, now may be the best time to act as Business Asset Disposal Relief remains at 10% until April 2025, at which point it rises to 14%. Planning your exit strategy now could save you money in taxes down the line.

3. Prepare for New Business Rates

New permanent business rate discounts of 40% will replace the temporary 75% discount currently in place. Make sure you assess how this will affect your financial plans and use government resources to calculate the rates your business will pay.

4. Explore Opportunities for R&D Relief

If innovation is part of your growth strategy, the continued availability of Research & Development (R&D) relief should be factored into your budget. Allocating resources to R&D can improve your product offerings and enhance your competitiveness in the market.

5. Other Budget Planning Considerations

When drafting your 2025 budget, here are some other critical areas to keep in mind:

• Seasonality of Your Business: Many businesses experience fluctuating demand depending on the season. Plan for slower months and ensure you have enough cash flow to sustain your operations during quieter periods.
• Profit Margins by Product/Service Line: Not all your offerings will contribute equally to profitability. Evaluate your margins to help you prioritise investments and ensure you’re focusing on the most profitable areas of your business.
• Recurring vs. One-Off Income and Expenses: Having a strong understanding of your recurring income and expenses will help with cash flow management. Consider ways to increase steady, recurring income streams, as these provide more financial stability.

Preparing your budget for the coming year doesn’t just involve looking at numbers, it requires careful consideration of both external changes and internal factors. Taking the time to analyse and understand these aspects to help you make informed decisions that support growth, stability, and financial health in the year ahead. If you need help navigating the changes and creating a robust budget for your business, or if you have any questions as a result of this article, feel free to reach out – I’m here to help.