Quick Summary of Labour’s 2024 Budget
From April 2025, significant adjustments to National Insurance will directly impact employer costs:
- Employer NI Contributions: The rate for Employer National Insurance (Secondary Class 1 NIC) will rise from 13.8% to 15%. This increase will affect most employers, raising the overall cost of employment.
- Lower Secondary Threshold (ST): Employers will start paying NI contributions on earnings above £5,000 per year (or £96 per week), down from the current threshold of approximately £9,100 per year. This change means employers will pay NI on a broader portion of wages, increasing costs, especially for lower-paid employees.
- Employment Allowance: To help mitigate the impact for smaller businesses, the Employment Allowance will increase from £5,000 to £10,500. Eligible employers can offset this allowance against their NIC liability, potentially reducing it to zero. Additionally, the £100,000 threshold on eligibility will be removed, so businesses with a prior tax year NIC liability over £100,000 can now also qualify.
- Upper Secondary Thresholds (UST): The UST remains unchanged for specific groups: it’s set at £25,000 for special tax sites (e.g., investment zones and freeports) and £50,270 for those under 21, veterans, and apprentices under 25. Employers can take advantage of these thresholds where applicable to reduce costs for eligible employees.
Minimum Wage Increase: Minimum wage rises 6.7% to £12.21 for adults and 16.3% to £10 for younger workers, raising payroll expenses.
Capital Gains Tax: The lower rate increases from 10% to 18%, and the higher rate from 20% to 24%. Rates on property remain the same, and the lifetime limit for Business Asset Disposal Relief stays at £1 million.
Corporation Tax: Corporation tax will remain at 25% for the remainder of this parliament.
Non-Dom Status Removal: Abolition of non-dom tax status increases UK tax exposure for affected clients.
Inheritance Tax (IHT): IHT thresholds remain frozen until 2030, and inherited pensions will be subject to IHT from April 2027.
VAT on Private School Fees: From January 2025, fees will carry VAT.
Stamp Duty Land Tax Surcharge on Second Homes: Known as the “Higher Rate for Additional Dwellings,” this surcharge will rise by 2 percentage points to 5% from Thursday.
How Will This Impact Accounting Firms?
Increased Payroll Expenses: Firms will face higher payroll costs due to NI and wage changes, making careful budget planning and workforce cost management essential.
Growing Demand for Tax Advisory: Changes in CGT, inheritance tax, and non-dom status and other tax mean clients will need more guidance on tax planning to manage increased liabilities and structure their finances efficiently
Advisory on New Client Costs: Additional taxes on private school fees, increased stamp duty for second homes, and adjustments to inheritance tax create new planning needs. This is an opportunity for firms to provide insight on managing these fiscal impacts
3-Step Action Plan for Supporting Clients
1 – Summarize and Share Key Budget Impacts
Provide Clients with Tailored Summaries: Break down the specific impacts that are most relevant to each client and the impact on their companies.
Highlight Actionable Tax Changes: Could use a summary to make it easier for clients to act on pressing tax considerations.
2 – Offer Strategic Financial Planning Support
Optimize Payroll and Staffing: Help clients manage rising payroll costs by exploring options for strategic staffing adjustments.
Advise on Tax-Efficient Planning: Work with clients to plan tax-efficient structures that support their financial health.
3 – Position Yourself as a Trusted Advisor Amidst Change
Check In Regularly: Providing ongoing insights helps clients make informed decisions while strengthening the relationship.
Share Resources for Long-Term Resilience: Point clients to relevant tools, industry guides, or best practices to help clients navigate these changes.
How Remote Professionals Can Help?
Free up your time to focus on clients – Remote Resourcing Managed Service:
Reduce internal staffing costs – done through offshoring heavy lifting accounting tasks:
Join our accounting firm growth club to keep up to date with resources to help your firm grow:
