The Autumn Budget 2024: the industry reacts
On the 30th October, the long awaited Autumn Budget was delivered by Chancellor of the Exchequer, Rachel Reeves.
The Autumn Budget has seen the technology industry receiving a boost from the Government, as Reeves stated she will “drive growth across the country.”
The Budget outlined a series of multi-year funding commitments, with £1 billion earmarked for the aerospace sector, over £2 billion directed to bolster the automotive industry, and particularly electric vehicle manufacturing, and as much as £520 million set aside for establishing a Life Sciences Innovative Manufacturing Fund.
Reactions to the budget are strong, but this is also an important time to recognise the history that has been made, as Reeves is the first woman to hold the office of Chancellor since the position was created over 800 years ago. Today Reeves had become the first woman to present the Budget.
As the nation reflects on the Budget, we ask what else has been announced, and how is the industry reacting to these new measures?
Personal tax updates
- Income tax and National Insurance thresholds freeze set to conclude in 2028, aiming to prevent individuals from entering higher tax brackets as wages grow
- Capital Gains Tax on profits from share sales to rise, increasing from up to 20% to up to 24%, while rates on gains from additional property sales remain unchanged
- Inheritance Tax thresholds freeze extended further, now lasting until 2030
Business taxes
- From April, businesses to begin paying National Insurance on employee earnings above £5,000 – lowered from the previous £9,100 threshold – with the rate rising from 13.8% to 15%
- The Employment Allowance, which enables firms to reduce their National Insurance obligations, set to increase from £5,000 to £10,500
- Tax on profits earned by private equity managers from successful deals to increase from up to 28% to up to 32%, effective April
- The main rate of Corporation Tax, applicable to taxable profits exceeding £250,000, to remain at 25% until the next election
Wages
- From April, the legal minimum wage for those over 21 will increase from £11.44 to £12.21 per hour
- Wages for 18 to 20-year-olds will rise from £8.60 to £10 per hour, aligning with a broader goal to establish a “single adult rate”
- Apprentices will see their hourly pay rise from £6.40 to £7.55
UK debt, inflation, and economic growth
- The Office for Budget Responsibility forecasts UK economic growth of 1.1% this year, with an increase to 2% next year, and a projected 1.8% by 2026
- Inflation expected to average 2.5% this year, rise slightly to 2.6% next year, and ease to 2.3% by 2026
- The official scope of UK government debt has been broadened to incorporate a wider range of financial assets, including future repayments on student loans
The industry reacts
Emma Jones, CBE, Founder and CEO of small business support platform and membership community Enterprise Nation, reacted to today's Budget: “Today the Chancellor has taken some very difficult decisions. Tomorrow, small businesses must do the same: do they put up their prices, redirect growth investment, or decrease their staffing levels?
“While we are pleased to see some allowances have been made for the smallest firms that employ people on the minimum wage without having to pay National Insurance, it will not touch the sides when it comes to the £25 billion tax hike on businesses announced.
"Small businesses are resilient in the face of adversity, but they will need help to rethink their strategy to cope with an increased tax burden.
“We welcome a fresh discussion on business rates, and are ready to engage, but the announced reduction of the Business Rate Relief will see costs for many independent high street retailers almost double from April, so we must see urgent progress on this.
"We are pleased the Government listened to our pleas for continuity on business support with extensions for Shared Prosperity Funding and Help to Grow: Management.
“We look forward to working with the government on their Small Business Plan to help ensure small businesses can trade through increased costs.”
Charles Precious, Principal, Client Services Leader at Ryan, commented on the latest Budget announcement: “Businesses have craved stability for a long time, and while they might not be thrilled with all of the changes announced today, they can at least now start planning properly for the long term – rather than from budget to budget. This includes the guarantee from the government that Corporation Tax will be capped at 25%. We welcome the government’s rollout of a full, corporate tax roadmap so that businesses can finally have a clear sense of direction on where UK business taxes are heading.”
Commenting on the impact of today’s Budget on the UK’s startup and investor communities, David Ovens, Joint Managing Director, Archangels said: “Today’s Budget offered the Chancellor a chance to outline a tax approach that nurtures entrepreneurship, encourages investment and innovation, and fuels long-term economic growth. Instead, we have seen a raft of measures, from raising CGT and Business Assets Disposal Relief, to raising employer National Insurance and lowering the rate threshold, all of which will undermine the country’s attractiveness as a place to start and scale a business.
“While we all must face up to fiscal realities, these tax increases fly in the face of the Government’s pro-business commitments and will only serve to dampen the UK’s entrepreneurial spirit. Given the well-documented importance of SMEs to economic growth, these changes are a major cause for concern.”
Jon Dawson, Head of Creative, Media, and Technology at haysmacintyre said: “The SME economy in the UK has been built on an agreement that entrepreneurs who take the significant risk of starting a business – and often endure low salaries for many years – should be rewarded for their success. As such, it’s important that exemptions are carved out for entrepreneurs who take this risk to promote more SME businesses in the UK.
“A Capital Gains Tax increase to 24% is discouraging but not devastating, and is perhaps more favourable than most expected. Anything much higher than this, would have likely caused a medium-term exodus of would-be founders and so the increase to 24% should be seen as somewhat positive. Nevertheless, with some territories like Dubai offering comparatively very attractive tax-regimes some will inevitably be tempted to look elsewhere especially since this change comes alongside increases in employer’s NI and tougher rules for non-doms and inheritance tax.”
Seb Wallace, Investment Director at Triple Point Ventures, had this to say: “Capital Gains Tax rates reward business owners who habitually take significant personal and financial risk to drive growth in the UK economy. The Government's hike in the higher band of Capital Gains Tax to 24% without increasing Business Asset Disposal Relief is disappointing, it remains within the limits of what may be manageable for entrepreneurs.
“The nature of this risk is vastly different from the risk an employee takes to earn income, and it deserves to be recognised as such. Any move to increase capital gains tax for business owners without a material increase in Business Asset Disposal Relief risks a flight of talent out of the UK. It is something we are hearing many founders talking about.
“We must separate the conversation about capital gains from unearned income, such as property investments, from gains earned by hard-working entrepreneurs who are actively driving economic growth.”
Dr John Lazar CBE FREng, President of the Royal Academy of Engineering, commented: “The Chancellor’s first budget was a difficult balancing act, and we are pleased to see a long-term commitment to research and innovation, which is proven to help business, productivity, and growth. We know the pressures on public finances that put government spending on research and development in the spotlight, and also that R&D spending is the catalyst for economic success. We welcome the commitment to protect government investment in R&D, and the acknowledgement of the key role that the UK’s National Academies play in driving innovation in engineering, biotechnology and medical science. It is now up to the Science, Engineering and Technology sector to work with the government to deliver the innovation and growth needed to unlock investment and create jobs.”
“With sustained investment in innovation and entrepreneurship, the UK is well placed to leverage its impressive engineering and technology strengths to sustain business confidence, catalyse investment and power growth, and ultimately improve our public services and productivity.”
“The economy can only grow if the infrastructure that underpins it keeps pace with its needs – we welcome the £100 billion additional investment over the next five years to fund public infrastructure, and the boost this will give to UK capabilities and regional development."
Andy Aitken, CEO and Co-Founder of Honest reacted: "Not many entrepreneurs I know started their businesses with tax planning in mind, but they did believe their hard work and sacrifices would pay off. With the CGT rate jumping from 10% to 24% and the significant reductions in BADR, it feels like the rules have changed dramatically overnight. Such a sudden shift really breaks down trust within the business community.
“Given these drastic changes, it’s no wonder some founders are looking to relocate their businesses – and even their personal tax residencies – to places like Portugal and the UAE. While the allure of a new location and potentially lower taxes can be tempting (not to mention not being legally allowed to spend more than 15 days a year in the UK), moving isn’t as simple as it sounds. There are complex legalities and hefty fees involved in getting the right legal and financial advice. Plus, even after relocating, there’s a strong chance they’ll still encounter similar taxes and regulations in their new country and be subject to many of the UK ones too if they still trade in the UK.”
Chris Lewis, Chair of the VCT Association, following today’s budget, said: “Today’s Budget underscores the Government’s commitment to sustained economic growth. Venture Capital Trusts (VCTs) will continue to play a crucial role in delivering this through supporting high-growth businesses and providing essential funding to scale up companies across the UK, and we welcome the Chancellor’s reiteration of the Government’s commitment to extend the scheme for another 10 years. With over 1,000 businesses currently benefiting from VCT funding, the sector significantly contributes to job creation and innovation.
“Given the tax changes announced today, the benefits of VCTs for both investors and entrepreneurs are even more compelling. VCTs provide tax-efficient investment opportunities while offering patient capital that is reinvested to support the long-term growth of UK businesses. The scheme also continues to offer a tax-efficient way to invest in the AIM market despite the new 20% inheritance tax on AIM shares. Now is a pivotal moment for close collaboration between the VCT industry and the UK Government to seize the opportunity for growth.”
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