The first Labour budget in 14 years has just been delivered!
Here’s our first take of key changes and their expected impact on SMEs:
1. Increase in National Minimum Wage
From April 2025, the National Minimum Wage is set to rise from £11.44 £12.21 per hour for adults over 21(6.7% increase). While this could support lower paid employees, it will increase operational costs for SMEs, particularly in retail and hospitality sectors, which are heavily reliant on minimum wage workers. Businesses may need to review payroll expenses and possibly adjust staffing or pricing to balance these increased costs. Of particular worry for businesses employing young people, there will be an equalisation of NMW for 18-20 year olds over time to eliminate the age differential. The initial increase for 18-20 year olds will go from £8.60 to £10 which is a significant 16.28 % hike!
2. Employer National Insurance Contributions
Employer’s National Insurance contributions (NIC) will go up by 1.2% from April 2025, rising from 13.8% to 15%. As a further whammy employers must pay NIC on employees earnings from £5000, down from the current £9,100.
The threshold for payment of NIC, (employment allowance) will rise from £5000 to £10,500, which protects only the very smallest of employers.
This change will be detrimental to the already tight purse strings of SMEs, as higher NICs mean additional payroll costs. For some businesses, this increase might necessitate revisiting workforce strategies or considering efficiencies to manage the added burden on cash flow.
3. Fuel Duty Increase
This has been frozen for a year, maintaining the last government’s 5p cut.
4. Capital Gains Tax (CGT) Adjustments
CGT will be increased with the lower rate rising from 10% to 18% and the higher rate will rise from 20% to 24%.
As always, if you have concerns, get in touch with our team. There are lots of things SME organisations can put in place to avoid job losses, redundancies should always be a last resort.
Contact our expert advisors on 0333 888 1360 or email [email protected]
