At a glance
- Accountancy experts’ reactions to the Budget and its impacts on their clients were mixed
- Tax hikes were considered likely to drive up costs and reduce investment in the UK
- Meanwhile, digitisation efforts and clear future planning present opportunities
Reactions were mixed, with some concerned about the possible impacts of the changes, and others more optimistic about the opportunities for them and their clients. Here’s what they think.
Employer National Insurance contribution threshold drop was “reckless”
Changes to employer National Insurance were announced, including that it would be increased to 15% from 6 April 2025. Derry Crowley, CEO of Xeinadin says that while this change was expected, “The slashing of the secondary threshold from £9,500 to £5,000 is reckless. Despite there being a relief for the very smallest of businesses, this will represent a massive hike in tax for the majority of the UK’s SME sector.”
Crowley says that increasing the cost of UK-based employees makes the UK less attractive for hiring new talent.
“It is the employers that will bear this cost,” he says.
“Whilst swallowing up the black hole in public finances, it will create a host of problems for the majority of businesses in this country.”
Vipul Sheth, Managing Director of AdvanceTrack describes the announcement as “a big blow to UK businesses of all sizes who are already grappling with a range of escalating costs”.
“Rather than fostering a climate of innovation and opportunity, this measure only adds to the idea of a country where it is increasingly challenging for businesses to thrive.
“The Government should be supporting, not penalising, the very employers who are vital to economic resilience and growth.”
Corporation tax roadmap means businesses can plan for the long term
The Chancellor also announced the Corporate Tax Roadmap 2024, which guarantees that corporation tax will be capped at 25%.
For Charles Precious, Principal and Client Services Leader at Ryan, the long-term view provides long overdue security for businesses.
“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,” he says.
“While they might not be thrilled with all of the changes announced today, [businesses] can at least now start planning properly for the long term – rather than from Budget to Budget.”
Capital gains tax rise could dissuade investors
Capital gains tax increased from 10% to 18% and the higher rate from 20% to 24%, excluding residential property. Lisa Miles-Heal, CEO of Silverfin, says this could dissuade investors from risking their own capital.
“By chipping away at incentives, this approach may stifle the appetite for risk, dampening the flow of vital investment into UK businesses,” she says.
“This Budget risks falling foul to Newton’s third law – generating an equal and opposite reaction. Its goal to foster economic stability and drive growth may inadvertently become a blunt instrument that discourages investment, potentially holding back billions from reaching the British balance sheet.”
Accountants will play a crucial role in helping clients manage higher costs and potential restructuring needs, says Dr Drew Woodhouse, Senior Lecturer in Economics at Sheffield business school.
“Capital gains tax adjustments, especially on Business Asset Disposal Relief, will demand careful planning from accountants, especially for clients with significant investments.”
Leaving R&D tax relief rates untouched a “smart move”
For some experts, businesses will also be impacted by what the Chancellor didn’t announce. Nigel Holmes, Director of Research and Development at Ryan, says it was a smart move Chancellor to leave R&D tax relief rates untouched.
“Before today, we were starting to see clients hold back on decisions to access government initiatives such as R&D tax credits and grant funding, as they couldn’t confidently plan these into their forecasts,” he says.
For Holmes, regimes like including full expensing and the Annual Investment Allowance for Capital Allowances are lifelines for businesses looking to innovate and grow.
“Now we know this funding is here to stay, we hope to see more firms capitalising on these reliefs and playing their part in putting the UK on the map as a global technology leader,” he says.
HMRC modernisation will drive digitisation
Finally, the Chancellor announced that she is to increase funding to modernise HMRC, close the tax gap, and improve customer service. Russell Gammon, Chief Solutions Officer at Tax Systems, says that this pledge shows that the Government is prioritising digitisation efforts.
Gammon says he sees businesses taking the initiative and driving digitised tax initiatives forward regardless of HMRC regulation. However, businesses need the continued support of the Government to improve reporting accuracy and efficiency.
He adds that while we are making some progress, the UK is still playing catch-up with many other countries that have already embraced advanced digital tax systems.
“Now is not the time to stagnate. Now is the time to push forward and realise the full potential of the digitalisation of tax,” he says.
The IFA will hold an Autumn Budget update on 19 November. More information HERE.
