Uncategorised Autumn Budget 2024: Exploring the Six Biggest Impacts for Small Businesses

By Kimberly Bradshaw (CEO, Spotlight HR.)

Edition: November 2024.

This month, we’re diving into the key budgetary changes from the new Chancellor’s Autumn Budget that will impact SMEs the most, by identifying the six most significant areas that could affect your business’s bottom line:

  1. National Insurance Hike: Increased Costs for Employers
  2. Higher National Living Wage: Good for Workers, Challenging for Employers
  3. Supporting Employment and Skills
  4. NIC Relief for Small Businesses
  5. Incentives for Innovation and Investment
  6. Rising Costs and Uncertainty for SMEs

 

Excitingly, and in a brief departure from the budget, we also want to share some rather thrilling Spotlight HR news.

This month marks Spotlight HR’s 5th anniversary! Woo-hoo!

So, a BIG thank you for your support, trust and collaboration. This year alone, we saw 40% growth in sales and exceeded our annual target by 14%! Here’s to raising a glass to future growth, innovation, and success for us all. Best wishes to everyone who’s been part of this journey so far! Onwards…

Autumn Budget 2024: What It Means for Small Businesses

This autumn, Chancellor Rachel Reeves made history as she delivered the first-ever budget by a woman and the first Labour-led budget in 14 years. But beyond its historic headlines, this budget has significant implications for SMEs across the UK. With a focus on “economic stability” and “enhanced investment,” the budget brings policy changes that could impact your business’s bottom line.

Here’s what SME owners need to know to navigate the challenges and opportunities ahead:

1.National Insurance Hike: Increased Costs for Employers

One of the most impactful changes for businesses is the rise in employers’ National Insurance Contributions (NICs). Set to increase from 13.8% to 15% by April 2025, this hike also lowers the threshold for paying NICs from £9,100 to £5,000.

This hike is part of a broader plan to generate the £40 billion in revenue required to close what Reeves describes as a “£22 million black hole” left by the previous government. While larger corporations may absorb these costs, SMEs could face hiring freezes or even layoffs as they grapple with increased payroll expenses.

Your take home: This NIC increase could strain finances for businesses with tight budgets, possibly leading to revised hiring plans and operating costs. Assessing these changes early will be key to managing your bottom line effectively. Spotlight HR has robust strategies to assist your organisation if you need advice. Let’s chat.

2.Higher National Living Wage: Good for Workers, Challenging for Employers

Effective from April 2025, the National Living Wage will rise to £12.21 per hour, with the National Minimum Wage for those aged 18-20 climbing to £10.00. While this change is great for employees, it brings added cost burdens for employers in industries like retail, hospitality, and care.

Your take home: If your business employs minimum wage workers, you should explore operational efficiencies, adjust prices, or rethink your staffing strategy to manage these increased wage costs. Contact us if you need help formulating a dynamic plan to protect your business. Let’s chat.

 

3.Supporting Employment and Skills Initiatives

The Get Britain Working initiative introduces new measures to tackle workforce shortages and economic inactivity. These include £115 million for the Connect to Work programme to support employment for people with disabilities or health conditions and £1.8 billion in childcare funding.

Your take home: These initiatives could create a broader talent pool for recruitment via new employment and training programs. Contact us to harness this advantage and keep an edge over your competitors. Let’s chat.

 

4.NIC Relief for Small Businesses

The employment allowance will increase from £5,000 to £10,500 to help offset the NIC increases. This will enable small businesses to employ up to four full-time workers at the new National Living Wage without incurring NICs on their wages.

Your take home: If your business is a small team, this increase in employment allowance could help balance the new NIC costs, making it easier to manage payroll and stay profitable. If you need clarification, Let’s chat.

5.Incentives for Innovation and Investment

The budget also includes incentives to drive investment in high-growth sectors, particularly technology and innovation. Although details are still limited – we shall keep you posted – these incentives signal government support for businesses looking to expand their tech capabilities.

Your take home: If your business is interested in innovation or digital expansion, staying updated on these incentives could be a game-changer. They could help fund technology upgrades or research projects, keeping you ahead of the curve. We will keep you informed about future announcements to help you maximise these opportunities. Alternatively, contact Spotlight HR directly to navigate your path to digital expansion. Let’s chat.

 

6.Rising Costs and Uncertainty for SMEs

With rising NICs, wages, and compliance obligations, SMEs may struggle with profitability. Experts warn that these combined pressures could lead to hiring freezes or even layoffs, particularly in sectors like retail and hospitality.

Your take home: If costs are becoming a concern, now is the time to review your budget and look for operational efficiencies.

To manage these pressures effectively, you might consider:

  • Flexible work arrangements,
  • Process optimisation, or
  • Focusing on employee retention.

Get in touch to explore how to get the best out of your people. Let’s chat.

 

Final Thoughts: Navigating Change and Preparing for the Future

The autumn budget brings both challenges and opportunities for SME owners. While higher allowances and investment incentives offer support, increased NICs and wage costs may strain finances. If you want a more detailed review, click here – or read on for our roundup of the key takeaways.

Key Takeaways for SMEs:

  • Review NIC and wage costs to understand how these changes impact your payroll.
  • Use the increased employment allowance if you have a small team to help offset additional NIC costs.
  • Stay updated on innovation incentives and consider whether they align with your growth goals.

Ultimately, the budget’s impact on SMEs will depend on each business’s ability to adapt and leverage new opportunities. With thoughtful planning and a focus on financial health, your business can navigate these changes and continue thriving in the years ahead. The good news is that Spotlight HR is here to guide you along the smoothest route, providing support and guidance every step of the way.

At Spotlight HR, we are strategic partners to many businesses across London, East Sussex and the UK. From individual outsourced projects to assisting your in-house function, our experienced team specialises in HR services for SMEs—book your FREE consultation.