UK Budget? Don’t Panic!

The UK’s autumn Budget of last week was Labour’s first in 14 years. There was much speculation in the lead up to it, some hope and a heavy dose of scepticism. Of course, the critics were out in force in the media, notably those with large pots of assets that might have more tax to pay when their rich relatives die off. And, of course, businesses were worried. There were tax hikes, although these, if you have been following finance news for a while - a must for small business owners - would have come as no real surprise at all; the UK economy was (is still) fragile and we all suspected, if not knew, about the deep “Black hole”.

On the less pleasant side, employers will have to pay more contributions to their employees’ National Insurance. It’s a significant increase that is expected to raise £25bn over the course of this parliament. A much-needed boost to public finances but a tough call for small businesses. Some experts are predicting this could lead directly to job losses. At Athena, we think that most employers will be able to adjust their finances to take on this extra cost. It will mean looking at your plans and shifting these a little. Perhaps that growth project you had been planning will need to be reevaluated. Perhaps you will need to review your pricing which brings a risk of losing customers, but balance that with improving service and quality and customer loyalty is likely to pay off. You can ride this storm.

There is help for small businesses and the Budget also doubled Employers’ Allowance increasing this from £5000 to £10,500 to help with those additional costs. It has also removed the employers’ national insurance threshold of £100,000 so that all employers can take advantage of this allowance. It is estimated that this will provide relief to over 1 million small businesses.

There will be an increase in Capital Gains Tax from 10% to 18% at the lower rate and from 20% to 24% at the higher rate, and this will affect businesses and individuals on the sale of assets, notably, in terms of the businesses we work with, small landlords that may need to sell a property that is not their only or principal home.

The National Minimum Wage increases to £12.21 per hour. This was not at all unexpected and at Athena, we understand the extra pressure this puts on businesses, especially very small businesses, but as a team, we believe that everyone deserves a fair wage for their work, to feel valued and to know that their work helps them pay their way in life. Interestingly, when we spoke to our clients about their first reactions to the budget, they all agreed with this view and are now beavering away to find ways of ensuring their businesses continue to function well, profitably and contribute to the economy and to society as a whole. We love our clients!

How do some of the changes affect the small business context in the wider economy?

There is a lot of talk in the media about growth being stunted because of this increase to business costs. However, the forecasts remain in positive figures, albeit small: 1.1% GDP growth this year, rising to 2.0% in 2025 with a likelihood that the budget will add 0.6% growth during 2025.

On the downside, business finances are going to take a hit and this means that plans to grow and invest may need to stay on the back burner for a while so that businesses can adjust. Some are predicting job losses, but in the main, the greater likelihood is that wage increases other than NMW may be smaller than hoped for so that business owners can ride the wave of that increased tax burden.

The Budget has also provided for 40% on business rates in 2025 - 2026, funding of £3.9 bn for investment in green technologies, so help available for small business in the field of renewable energy, and more investment in mobile broadband to improve the business environment.

So it’s not all doom and gloom and small business owners, solopreneurs and all of you who regularly visit our site and engage with our services are creative, driven, passionate individuals that can make it work!

And, of course, we are here to help you. Contact us for a free, no-obligation one hour online chat, where you can throw your business headaches at us, pick our brains, chuck ideas about, and perhaps sign up for some extra support. We’re waiting to meet you!