Labour’s Autumn Budget: The FACT3 Take
The recent fiscal updates have significant implications for SMEs; affecting employment costs, tax liabilities, and compliance obligations. We’re here to provide clarity on the key updates; what these changes mean for your business and offer support as you adapt to them. Here’s a breakdown of each change and its potential impact.
The Headline: Employer NIC
From 6th April 2025 the main employer NIC rate will rise from 13.8% to 15.0%, and the threshold at which NICs apply will be reduced from £9,100 to £5,000.
Alongside this, there has also been a change to the Employers Allowance which moves from £5,000 to £10,500. The cap of £100,000 total NI has also been lifted.
What This Means for You:
This change increases the cost of employing people, especially those earning above the new threshold of £5,000 a year. For businesses with high labour costs or tight margins, this may require adjustments to budgeting, forecasting, or people strategies. Small and medium-sized businesses could face higher payroll expenses and may need to evaluate whether to pass on costs, streamline processes, or consider other efficiency measures.
For smaller businesses with few employees, the Employers NI burden may actually have been reduced.
FACT3’s Take:
We can help you strategise for these adjustments and act as a sounding board to explore options for managing increased employment costs effectively.
As businesses try to get a grasp on how much this will cost them from April 2025, we’ve created a calculator to give you an indication of the potential costs for your business, with the option to have an impact 1-2-1 with an expert, access it HERE.
The Headline: Capital Tax Gains
Effective immediately, capital gains tax has increased to 18% for basic-rate taxpayers and 24% for higher-rate taxpayers. The business asset disposal relief rate will rise to 14% in 2025/26 and 18% in 2026/27.
What This Means for You:
These hikes affect businesses planning to sell assets or shares, as well as owners considering business exits. Increased CGT may impact the net gains from asset disposals, which is worth factoring into your long-term financial planning. Strategic tax planning can help optimise disposal timing and mitigate potential tax burdens.
FACT3’s Take:
Our accounting team can work with you to align your business strategies with your exit planning.
The Headline: National Minimum Wage Increase
The NMW will increase significantly for 18-20 year-olds to £10 per hour (a 16.3% rise) and for those 21 and over to £12.21 per hour (a 6.7% increase), effective from 6th April 2025.
What This Means for You:
For SMEs employing young workers, wage costs will increase substantially. Higher wage rates can attract and retain staff but will require budget adjustments. Businesses with tight cash flow may need to evaluate the impact on profitability and consider productivity-boosting measures to offset wage increases.
FACT3’s Take:
We can assist you in updating payroll and advising on budget adjustments to help manage these increased wage obligations. Our People team can also support you by taking a look at your Total Rewards and Pay strategy for the upcoming year, identifying any disparities between the lower and higher pay brackets and their correlation to experience.
The Headline: Corporation Tax Rate Maintained
The main corporation tax rate remains at 25%, and the small profits rate stays at 19% from April 2025. The government also promises to maintain full expensing, the annual investment allowance, R&D relief rates, and the patent box.
What This Means for You:
Stability in corporation tax rates is beneficial, allowing for predictability in long-term planning. The commitment to investment incentives, like full expensing and R&D relief, presents an opportunity for SMEs to maximise capital investments in growth areas without tax burdens.
FACT3’s Take:
We can assist in understanding and applying these reliefs and incentives to maximise your business investments.
The Headline: Extended Allowances for Zero-Emission Vehicles
The 100% first-year allowances for qualifying expenditures on zero-emission vehicles and EV charge points are extended until 31st March 2026 (corporation tax) and 5th April 2026 (income tax).
What This Means for You:
Investing in green technologies can not only enhance your business’s environmental profile but also provide tax benefits. If you’re considering fleet upgrades or EV infrastructure, these allowances make it financially advantageous.
FACT3’s Take:
Our team can help identify the potential tax savings from green investments and support you in making environmentally and financially sound decisions.
The Headline: Mandatory Payroll Software for Benefits-in-Kind Reporting
From April 2026, businesses will need to use payroll software for reporting and paying tax on benefits-in-kind.
What This Means for You:
This transition is intended to streamline reporting but will require SMEs to upgrade their payroll systems if they don’t currently support this feature. For smaller businesses, adopting and adapting to new software can be a time and cost investment.
FACT3’s Take:
Our Payroll team can provide you with an end-to-end solution.
The Headline: New PAYE Requirements for Recruitment Agencies
From April 2026, recruitment agencies must account for PAYE on payments to workers hired through umbrella companies. If no agency is involved, the responsibility falls on the end client.
What This Means for You:
This change places the PAYE responsibilities on recruitment agencies, though if you hire directly from umbrella companies, it may shift to you. Understanding this change can prevent unforeseen payroll liabilities.
FACT3’s Take:
We’re here to help you understand these requirements and how they apply to your staffing arrangements.
The Headline: Reforms to Employee Ownership Trusts and Employee Benefit Trusts
From 30th October 2024, reforms will address tax planning strategies for employee ownership trusts and benefit trusts, focusing on preventing misuse while still promoting employee rewards.
What This Means for You:
If your business uses employee ownership structures, these reforms may require adjustments to ensure compliance without losing benefits. They aim to encourage genuine employee ownership and fair rewards.
FACT3’s Take:
We can help ensure your employee ownership plans comply with the new regulations, aligning your incentives with government requirements.
Need More Support?
These updates have wide-ranging implications for employment costs, tax planning, and compliance for SMEs. At FACT3, our Accounting and HR team is here to help you navigate these changes, offering insights and solutions tailored to your business needs. Whether you’re looking to optimise payroll, understand tax liabilities, or plan for growth, we’re ready to serve as your trusted advisors and sounding board.
Reach out to us with any questions - hello@fact3.co.uk