What does the Autumn Statement 2024 mean for UK businesses?

Today, Wednesday 30^th October, newly appointed Chancellor of the Exchequer Rachel Reeves delivered Labour’s first Autumn Statement since 2010.

Delivered against a landscape of elevated public debt, a historically high tax burden and strained public services, there was even more pressure on the government to announce positive steps to support the UK economy and reposition it for further growth.

Ahead of the Autumn Statement, Prime Minister Keir Starmer didn’t make the “tough fiscal choices” that would be made a secret, particularly in light of the £22bn “black hole” that needs to be filled.

Among some of the headline changes announced were:

• Increase to national minimum wage from April 2025 – this will see the NMW rise to £12.21 per house at a single, national rate
• Fuel duty – frozen for 2025
• Employer National Insurance Contributions set to rise by 1.2% to 15% from April 2025. This includes a change to the threshold at which NIC becomes payable, which is now £5,000 from a previous £9,100
• Employment Allowance – increase from £5,000 to £10,600, which, according to the Chancellor, should be that 865,000 employers will not pay any NI next year
• Capital Gains Tax increases – the lower rate will move from 10% to 18% and the higher rate from 20% to 24%
• Increased rate to £1m Business Asset Disposal Relief (BADR)

In response to these adjustments, our team of business solicitors has responded to the Chancellor’s announcements, highlighting what this means for UK business:

“Fraud investigations may spike following Labour clamp down on tax”

Head of Business Crime and Regulation, John Hartley talks of the squeezes that these new tax hikes will impose on UK businesses, raising concerns about potential fallout, such as increased instances of unethical practices like tax evasion as businesses look for ways to offset rising costs.

“We were all more than prepared for the ‘painful’ tax hikes introduced by Chancellor Rachel Reeves in today’s Autumn Statement, but I have to wonder if due care and attention has been given to the potential impact of some of these increases, particularly in terms of how businesses may attempt to avoid or evade payment.

“Whilst the government aimed to offset the pressure of increased employer NI contributions by increasing the threshold for small businesses applying for the Employment Allowance, this employer NI increase could still see many businesses look to work with self-employed consultants to avoid additional tax costs. This could be potentially damaging to the country’s cohort of working people, leaving them with fewer employment prospects, particularly in sectors where a specific skillset is required.

“In relation to income tax, whilst these have not been increased the thresholds will remain frozen for a further 4 years. As the cost of living increases, we may therefore see more and more individuals falsifying their income and undercooking this to avoid higher tax penalties. In addition, whilst the details are yet to come, the changes to UK nationals with non-domiciled status will have a dramatic effect on tax liabilities and may again lead to potential tax evasion.

“Capital Gains Tax was an obvious route for the Chancellor to take when it comes to filling the so-called £22bn ‘black hole’ but again, we may see those impacted taking underhand tactics to avoid actually paying any additional tax. This may include selling assets for lower value to avoid increased CGT rates and taking payment for cash or services post-sale to reduce the market ‘sale’ price.

“And while much of today’s public outcry centres on increases to Inheritance Tax, the government is naive to think there won’t be attempts made to lessen the burden of this by minimising or falsifying the value of the deceased’s estate by hiding highly valuable assets.

“All of this potential lack of transparency could see a jump in fraud tax investigations for individuals for HMRC, making individual cases more difficult to track down and tackle.

“Clamping down on tax avoidance and misuse was high on the agenda and has been clearly signposted as a means to raise funds, with a focus on closing tax ‘loopholes’, an appointment of a Covid corruption commissioner to investigate the businesses who used a national emergency to line their pockets and a re-energised HMRC debt recovery taskforce as well as clamp down on tax avoidance schemes.

“The government has a difficult job on its hands, and while tough fiscal decisions are understandable, we cannot overlook the potential of fraudulent, underhand and even illegal tactics to circumnavigate these tax increases – particularly among those high-income individuals.”

“Increased employer NI payments will put strain on small businesses.” 

Head of Restructuring and Insolvency, Chris Love responds to the announcements, highlighting that while businesses have been targeted through tax hikes, attempts have been made to offset some of the challenges these post to small businesses:  

“It’s no secret that Chancellor Rachel Reeves delivered today’s statement against a backdrop of significant public debt, a historically high tax burden and strained public services. This, combined with added pressure of being a newly formed government made this year’s Autumn Statement even more anxiously anticipated.

“While Prime Minister Keir Starmer has been upfront about the “painful” potential of some of the upcoming announcements, the government fulfilled their promise on making no adjustments to major taxes including income tax, employee NIC, VAT and corporation tax.

“The tax changes will instead target businesses and business owners, with increased Capital Gains Tax, the limit of Business Asset Disposal relief and increased Employer’s NIC.

“The Chancellor has increased capital gains tax, with the lower rate increasing from 10% to 18% and the higher rate from 20% to 24%.

“After much rumoured speculation, it will come as no surprise that employer national insurance contributions are to be increased, however the government aimed to offset some of the challenges this could pose on small business within an increased threshold under the Employment Allowance.

“Minimum wage has also been increased, which will put more money back into the economy, but will have a significant impact to the bottom line of businesses. At a time when inflation is back under control and a reduction in the Bank of England rate has been mooted, this will have to be carefully considered. The changes to NIC and minimum wage will likely impact tax receipts from corporation tax.

“The government has focussed on delivering growth to an economy to achieve its goals, including the reduction of debt as a share of GDP by the end of Parliament. It remains to be seen whether this ambition will be affected by the potential impact on business from the Autumn Statement.”

If you need help with navigating these new changes to ensure you remain compliant and on the front foot with preparations that need to be made, please get in touch and our team will be on hand to provide our trademark straightforward, high quality advice and support.