The Autumn Budget is the government’s yearly plan for taxes and spending, this time laid out by the Labour Chancellor of the Exchequer, Rachel Reeves. For contractors, freelancers, and small businesses, there are some key changes to consider this year. Here’s a look at what’s new and how it might affect you;
Employer’s National Insurance Increase
One of the key changes is the rise in Employer’s National Insurance contributions, increasing from 13.8% to 15% on earnings above the Secondary Threshold. The threshold for payment will also decrease to £5,000.
Boost to Employment Allowance
To help small businesses manage rising costs, the Employment Allowance has been increased to £10,500, providing relief on Class 1 National Insurance contributions. This boost will benefit over 800,000 small businesses by offsetting part of the increased NI cost.
Compliance Changes for Umbrella Companies
From 2026, recruiters will need to ensure PAYE deductions are accurately processed when hiring through umbrella companies, a move aimed at reducing tax avoidance. This additional compliance requirement will place responsibility on recruiters to verify tax practices when working with contractors, aligning with HMRC’s ongoing focus on transparency.
Business Asset Disposal Relief (BADR) Update
For business owners planning to exit, BADR remains at a 10% rate until April 2025 but will increase to 14% from 2015, and even further to 18% from 2016. This gradual change provides an opportunity for those considering an exit to benefit from the lower rate in the short term. The lifetime limit will remain the same at £1 million.
Capital Gains Tax Adjustments
The Capital Gains Tax (CGT) lower rate is to increase from 10% to 18%, and the higher rate to increase from 20% to 24%. This change will make it more costly to sell assets like stocks, properties, or other investments, with the goal of increasing revenue for the government.
Stamp Duty on Second Homes
For those considering buying a second property, stamp duty rates on second homes and buy-to-let properties have been increased from 2% to 5% with effect from 31/10/2024. This measure targets the housing market to discourage the concentration of property ownership and make primary home purchases more accessible.
Income Tax Threshold Freeze
Income tax thresholds remain frozen until 2028, with future adjustments tied to inflation. This extended freeze can lead to “fiscal drag,” where earners are pushed into higher tax brackets due to inflation rather than real income increases.
Corporation Tax Rate
The main rate of corporation tax will remain at the current 25% until the next election.
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