The Chancellor’s budget is described as "tough" and a "hammer blow" for contractors as businesses and support organisations react
UK SME membership organisations fear the impact of Chancellor Rachel Reeves' decision to increase employers' National Insurance contributions by 1.2 percentage points (to 15% from April 2025), with the secondary threshold (ie when employers start paying NI on an employee's salary) also to fall dramatically (from £9,100 per year to £5,000).
Chancellor Reeves said these measures will raise £25bn a year. She added: "I know this is a difficult choice. I do not take this decision lightly. We’re asking business to contribute more, and I know that there will be impacts. But in the circumstances that I’ve inherited, it is the right choice."
Autumn Budget 2024 reaction
Self-employment membership association IPSE described the employer's National Insurance changes as a "hammer blow" for contractors employed by an umbrella company. Andy Chamberlain of IPSE said: "It will leave a huge dent in the finances of more than 700,000 umbrella company workers. Not only will they be covering a higher headline rate of employers' NI from next April, but they'll be paying it on an extra £4,100 of their earnings."
Roger Barker, Director of Policy at the Institute of Directors, said: "The government has chosen to impose a significant new tax burden on business as a means of achieving an immediate boost to its public sector spending priorities. The risk is that this will exert a negative impact on business confidence."
Shevaun Haviland, Director General of the British Chambers of Commerce, said:
"This is a tough budget for business to swallow but the Chancellor has looked to ease the pain by holding out a promise of better days ahead. While some protection for smaller firms is welcome, the increase in employer National Insurance Contributions will place a further cost burden on business. This, coupled with a 6.7% increase in the National Living Wage, means many firms will find it more challenging to invest and recruit in the short-term."
John Foster, CBI Chief Policy and Campaigns Officer, said: "The National Living Wage has been a valuable tool for protecting the poorest in society. But with productivity stagnant, businesses will have to accommodate this increase against a challenging economic backdrop and growing pressure on their bottom line. It will make it increasingly difficult for firms to invest to boost productivity and deliver sustainable increases in wages."
More Autumn Budget 2024 reaction
Andrew Goodacre, CEO of the British Independent Retailers Association, said: "Small retailers, who have already endured years of challenging trading conditions, now face a perfect storm of crippling cost increases. Their business rates will more than double as relief drops from 75% to 40%, while they're hit simultaneously with employer National Insurance rising. Add to this the minimum wage increase and many of our members are telling us they simply cannot survive."
Rory MccGwire, founder of Atom Content Marketing, creator of the Donut small-business advice websites said:
"This government appears committed to addressing the tough financial realities they’ve inherited, and for that, I commend them.
"However, it’s ironic that the hardest-working segment in our country – families who run small businesses – are being hit the hardest by these changes. While I’m relieved the Employment Allowance offers some relief for the smallest businesses, who often struggle the most with covering their costs and complying with the seemingly endless rules on tax and employment, the recent focus on ‘protecting the workers’ has created a sense of a ‘them-and-us’ divide in this Budget."
Mike Parkes, technical director of Self Assessment tax return-filing software provider GoSimpleTax said: "It’s a mixed Budget for self-employed people. No changes to income tax, National Insurance and VAT is welcome, while no increase to fuel duty will also be good news. Some contractors could shoulder the burden of the changes to employers’ National Insurance. However, those contracting through umbrella companies and paid a flat tax rate will find that the rise in National Insurance for employers will reduce their take-home pay, effectively making them collateral damage."
Small businesses have their say
It's been a big day in the small business community with the release of the Autumn Budget. Start Up Donut asked members of its small business community, the Donut Small Business Collective, for their thoughts.
"The budget was surprisingly helpful for small businesses with the increase in the Employment Allowance to £10.5k. This means that despite the Employers National Insurance rate going up to 15% and the threshold in which it starts lowering to £5k, many firms will be better off every year. Employers NIC’s have always been regarded as a tax on creating high quality jobs, these changes will certainly impact businesses with more senior team members, but will reward those creating entry level opportunities.
Overall the changes to capital gains tax seem to be relatively minor and I can’t imagine them having too much impact on the decisions investors make. The curtailing of BADR is a bit disappointing as it was designed to reward genuine value creation in our economy, it’s unlikely that the extra 4% on the rate will make any real difference to the tax take, however it sends a message that as a nation we don’t appreciate the risk and growth these entrepreneurs bring."
Nishi Patel, N-Accounting
"It’s a win to have a female Chancellor delivering the Budget and as a woman I’m delighted about that. The way I see it, the Budget presents an ideal opportunity for small business owners to review their business plans and focus on lean efficiency. Whilst most will see difficulties with the Budget, I see there are opportunities to adapt and change to grow. Regardless of the tax burdens, small business owners need to focus on maximising profitability and be consciously liquid to ensure longevity".
Aisha Ejaz, Managing Director, Zenith Street Growth Partners
"As a solopreneur marketing consultant, I spend a considerable amount of time driving to appointments and events. I was pleased to hear that the Chancellor will freeze fuel duty, meaning the amount we spend on the petrol forecourt will not increase. I think this is vital also for businesses who need to deliver their services and products in person."
Louise Chandler, founder of Soundbite Media