Key Issues for Individuals and Small Businesses in the Upcoming Budget: What to Expect

The UK's Autumn Budget, set to be delivered on 30 October 2024, has many individuals and small businesses keenly anticipating how changes might affect their finances. With the government facing the challenge of balancing economic recovery, inflation control, and public debt management, this budget is expected to focus on targeted support rather than sweeping reforms. Here's a look at the main issues likely to affect individuals and small businesses.

1. Tax Relief and Personal Allowances: Freezes Expected to Continue

For individuals, tax thresholds and personal allowances are always a key area of concern. Unfortunately, hopes for a rise in the personal allowance, currently set at £12,570, remain slim, as it is frozen until 2026. With inflation remaining high, this freeze will continue to push more people into higher tax bands, a phenomenon known as "fiscal drag."

For small business owners who rely on dividends or salaries from their own companies, this could mean higher tax burdens as profits rise with inflation. Dividends have already seen tax increases, and with personal tax thresholds unchanged, small business owners should expect higher effective taxes if their earnings rise. That said, no major increases to income tax rates themselves are expected—just the continued impact of frozen thresholds.

2. Energy Support: Expect Targeted Relief

Energy prices remain a critical concern as winter approaches, both for individuals and small businesses. While broad energy relief, like the Energy Price Guarantee, is unlikely to be extended in its original form, we can expect the government to offer targeted support for the most vulnerable households and specific sectors.

For small businesses, particularly those in energy-intensive industries such as retail and hospitality, this could take the form of grants or incentives for investing in energy-efficient technology. General subsidies or further caps on energy costs, however, are unlikely to be widely available.

3. Business Rates: Minor Adjustments, Not Major Reform

Business rates are a long-standing issue for small, bricks-and-mortar businesses. Calls for a major overhaul are likely to go unanswered, but there may be smaller tweaks to ease the pressure. An extension of the business rates holiday for sectors such as retail and hospitality could provide temporary relief, and there may be some adjustments to small business rate relief thresholds to allow more firms to qualify.

These measures will help struggling high street shops and small enterprises, but they are unlikely to address the deeper structural issues in the business rates system, which continues to favour online retailers and larger corporations.

4. National Insurance Contributions (NICs): Expect Stability

With the cost of living remaining a major concern, it's unlikely the government will increase National Insurance Contributions (NICs), either for employers or employees. Previous rises have already been implemented to support health and social care, and any further increases would be politically difficult during a time of economic uncertainty.

For small businesses, this means that employment costs, including NICs, are likely to remain stable. There's little chance of a cut in NICs either, but maintaining the current levels will at least provide some predictability as businesses manage their cash flow and staffing.

5. Corporation Tax: Higher Rates Remain, but Investment Reliefs Could Help

The rise in corporation tax to 25%, effective from April 2023 for businesses with profits over £250,000, is set to stay. For smaller businesses, those with profits under £50,000 will continue to pay the lower rate of 19%. This two-tiered system means that growing businesses, particularly those nearing the £250,000 mark, may face increasing tax bills as they scale up.

However, the government is likely to introduce or extend tax reliefs aimed at encouraging investment, particularly in machinery and technology. The super-deduction—which allowed companies to deduct 130% of capital investment costs—could be extended or replaced, offering smaller firms a way to invest in their growth while offsetting their rising tax burden.

6. Support for the Self-Employed: No Major Changes Expected

The self-employed sector has been hit hard in recent years, especially during the pandemic. While the government introduced support measures like the Self-Employment Income Support Scheme (SEISS), it's unlikely that new, large-scale support will be introduced in this budget.

However, the government may offer indirect support, such as further incentives for skills training or digital tools, which could benefit freelancers and gig economy workers. While large-scale reforms to tax or NICs for the self-employed are not expected, this sector will be watching closely for any relief that could help manage fluctuating incomes and uncertain work environments.

7. Green Policies: Incremental Steps, Not Major New Taxes

Environmental sustainability will likely remain a priority, but new green taxes or widespread carbon levies are unlikely to feature in this budget. Instead, we can expect to see more incentives for businesses to reduce their carbon footprints. This could include grants or tax reliefs for upgrading to more energy-efficient equipment or transitioning to electric vehicles.

For individuals, measures such as support for home insulation or renewable energy solutions may be extended. These policies are likely to be gradual, with a focus on helping both businesses and households make affordable transitions toward greener practices.

8. Digital Transformation: Grants and Loans for Small Businesses

The push towards digital transformation is expected to continue, with small businesses likely to benefit from new opportunities for government-backed grants or loans. As remote work and online sales become more prominent, many small firms need support to upgrade their digital infrastructure. This could involve help with setting up e-commerce platforms, customer relationship management (CRM) systems, or improving cybersecurity.

Given the government's focus on driving growth and productivity, it's likely that digital transformation will be a key area for small business support, particularly as more firms look to adapt and modernise.

Conclusion: Stability with Targeted Support

As 22 November 2024 approaches, it seems clear that this budget will focus more on stability and incremental changes rather than radical overhauls. For individuals, the continued freeze on personal tax allowances will lead to higher effective tax rates, especially with inflation factored in, and energy support will likely be targeted rather than broad. For small businesses, there is some hope for sector-specific reliefs and investment incentives, particularly in energy efficiency and digital upgrades.

Overall, businesses should prepare for targeted assistance but not expect major cuts in taxes or widespread new support measures. By focusing on steady growth and making the most of available grants or incentives, both individuals and small businesses can manage through this period of economic uncertainty while planning for a sustainable future.

What to do next

Be sure to check back for updates on any budget leaks or potential announcements.