Tag Archives: autumn budget

Business, Business Finance, Business Investment, Business News

Impact of Budget announcements felt by Welsh business in Q4

Employment measures announced in the Autumn Budget may have affected attitudes to recruitment by businesses in Wales in Q4 of 2024, according to Chambers Wales South East, South West and Mid’s latest Quarterly Economic Survey.

17% of businesses in Wales increased the size of their workforce over the last three months and 17% also expected their workforce to increase in the next quarter. While over half of the businesses surveyed (59%) expect the size of their workforce to remain constant in the next three months, there was a rise in the number of respondents who foresee that their workforce will decrease, from 15% in Q3 to 24% in Q4.

Fewer businesses in Wales attempted to recruit during the final quarter of the year than in Q3. Of those who did recruit in Q4, 65% experienced difficulties especially when recruiting for professional, managerial, skilled manual and technical roles.

The latest edition of the Quarterly Economic Survey also included questions specific to measures announced in the Budget such as the proposed increase to the National Minimum Wage and National Living Wage from April and whether the changes would impact businesses’ staffing plans, particularly in relation to hiring young people such as graduates, school and college leavers.

Around half of the respondents revealed that the increases to £10 and £12.21 an hour for the minimum wage and living wage respectively would not affect their business. Other businesses in Wales suggested that they would have to either halt recruitment plans, approach recruitment with caution or increase the prices of their services.

Businesses also expressed their hesitation to hire young people, with many reducing the numbers they plan to recruit in 2025.

Gus Williams, interim CEO at Chambers Wales South East, South West and Mid, said: “Taxation has become the external factor causing the most concern for businesses in Wales and the measures announced in the Budget such as the increase to employers’ national insurance contributions, combined with rising labour costs and changes to employee rights, have not surprisingly driven those concerns.

“Our Quarterly Economic Surveys show that recruitment remains a persistent challenge for businesses in Wales, and this continued in Q4 with a rise in the number of firms expecting their workforce to decrease and fewer investing in training. One of the impacts of the tax and National Minimum Wage increases looks to be a reduction in expected entry level recruitment this year.

“As businesses review their budget planning in preparation for upcoming changes, more support is needed to tackle barriers to growth such as access to skills development and learning pathways to help companies attract and retain talent with the right skills for their sectors.”

Business, Business Advice, Business Finance, Economy & Jobs News, Politics

The Budget – key next steps for businesses

Gus Williams, interim CEO at Chambers Wales South East, South West and Mid, shares the key next steps for businesses in Wales following the Autumn Budget.

 

National Insurance and National Minimum Wage increases

“Businesses should look at their budget planning for next year and cashflow forecasts. Both of these increases will impact the next round of staff wage increases and the increases to National Minimum Wage don’t just impact those at the bottom, but put upward pressure on those above. Getting this right can take time and require a few rounds of review and revision to get right and ensure all the potential knock on impacts are carefully considered. Businesses will need to consider the impact of these increases to pricing, cashflow and working capital.”

 

Employee Rights Bill

“Although we don’t have fixed dates yet, businesses with staff currently on zero hours contracts may want to include this consideration in their planning for next year and think about the impact of those staff who are able and want to move onto fixed contracts.  Both the tax and National Minimum Wage increases along with the proposed Employee Rights Bill will have impact on future staff planning and recruitment.”

 

Business owners considering selling or retiring

“The increases to Business Asset Disposal start from 5 April 2025, so those business owners already thinking about exiting may wish to consider the impact on their timeline.”

 

Businesses looking to acquire

“As above, the changes in Business Asset Disposal Relief in 2025 may provide an immediate opportunity to look at potential acquisitions you would like to make.”

 

Capital Allowances

“Capital Allowances are set to remain in place as they are. Those businesses who were concerned about certainty can now act and plan with confidence that the rules should remain the same for the foreseeable future.”

 

Inheritance Tax, business property relief and Business Asset Disposal Relief changes

“A common issue we see is business owners leaving it too late to plan effectively for retirement or exit in a way that maximises the value of their business or meets all of their retirement and exit objectives. Achieving this can require several years of planning to align the short-term and long-term business and financial objectives. Ensuring you plan further ahead can help minimise the impact and risks of tax changes.”

 

The government’s growth strategy

“The Budget identified important sectors that the government will be looking to support with specific initiatives. Businesses operating in these sectors may want to keep an eye out for further announcements and engage in any consultations. The Chambers will of course be contributing and help facilitate these. The sectors identified are:

  1. advanced manufacturing
  2. clean energy industries
  3. creative industries
  4. defence
  5. digital and technologies
  6. financial services
  7. life sciences
  8. professional and business services”

 

The industrial strategy can be found on the government’s website.

 

Farmers

“Generational small farmers will feel particularly aggrieved by the changes to agricultural land relief for Inheritance Tax and some intense lobbying will be taking place before these come into effect. Whether that lobbying will have any impact we will wait and see. As with the changes to business property relief, farmers will need to consider their succession planning and seek advice to ensure they have a workable plan in place that meets their objectives.”

Wales-specific impacts

“The increases to funding for the Welsh Government will be rolled into the next Welsh Government budget planning this December. Support for business will be a part of those discussions, and the Chamber will continue to be a voice for members and businesses as a part of the Welsh Government budget planning process.”

Accountancy & Accounts, Business, Economy & Jobs News, FInance, Finance and Banking, Finance News

Tax rises and complicated tweaks piles pressure on businesses

  • Multiple small tax changes announced at the Autumn Budget will create complexity for accountants and businesses
  • Small businesses will be feeling the pressure of new tax changes announced

 

ACCA, the leading global accountancy body, noted that while a commitment for greater stability in public finances is welcomed, including the alignment of economic strategy, a corporate tax roadmap and spending plans, it remains to be seen whether the announcements provide a much-needed boost to business confidence.

 

The changes announced continued the pattern of opaque changes to taxes, such as shifts to thresholds, to boost tax take in the short term, while avoiding long-overdue reform of our tax system, which will be necessary to create a long-term approach to investment and innovation.

 

Lloyd Powell, head of ACCA Cymru/Wales, said: “The focus on investment, economic stability, boosting growth and supporting public services are welcomed – with £1.7bn of additional funding for Wales though the Barnett Formula, the announcement on support for coal tips and a green hydrogen project in Bridgend.

 

“However, although partially offset by changes to allowances, the impact of the £40bn of increased taxes announced – including on Employer National Insurance contributions and thresholds and Capital Gains Tax – will be felt by many businesses across Wales. Business confidence, critical to encourage investment and stimulate growth, has been in short supply in recent months. Following these announcements, it’ll be more important than ever for these businesses to seek the advice of their accountants; to ensure they comply with changes, as well as refocusing business growth plans.

 

“Workers across Wales will welcome the decision not to increase Fuel Duty and to unfreeze Income Tax and NI thresholds from 2028/29.

 

“With a wide range of tax changes announced, the Chancellor should have gone further on simplifying the tax system, with the changes announced arguably adding to existing complexity.”

 

Glenn Collins, head of technical and strategic engagement, ACCA UK, added: “The UK tax landscape is already too complex, and yesterday’s announcements do little to address this. At a time when we need to see a longer-term approach to our tax system to support investment, we have seen more short-term adjustments to raise revenue, adding yet more complication. ACCA has repeatedly called for the government to commit to a programme of tax simplification and it was disappointing not to hear more about that from the Chancellor.

“Expectations were high ahead of the Budget. Ultimately it has left some questions unanswered, perhaps until the next phase of the spending review in spring 2025. Whether this will provide the clarity and certainty business needs remains to be seen.”

Economy & Jobs News, Finance News

Quantum Advisory comment on Autumn budget

Today’s budget has made history, with it not only being the first Budget announcement made by a Labour led government in over 14 years, but also the first ever Budget to be announced by a female Chancellor.

In this year’s Autumn Statement, the Chancellor Rachel Reeves, announced the steps the government propose to take in order to restore economic stability and plug the £22 billion reported black hole in the nation’s finances.

Increase in Employer National Insurance contributions and a decrease in the National Insurance threshold

Employers currently pay National Insurance contributions at a rate of 13.8% on employee earnings above the £175 per week threshold.

It has been announced today that the rate of Employer National Insurance contributions from April 2025 has increased by 1.2%, to 15.0%. Separately the £175 per week threshold under which employers start paying tax has been lowered to £96.15 per week. This is expected to raise in excess of £20bn of revenue for the Government.

In order to mitigate the effect of this on small businesses, the Chancellor did also announce that the employment allowance will rise from £5,000 to £10,500.

Sarah Garnish, a Consultant at Quantum Advisory, said:

“Whilst ‘working people’ pay packets will not be directly affected, this change could indirectly affect employees. For instance:

  • Employers reducing future salary increases in order to recuperate the additional costs.
  • A decrease in recruitment drives from companies leading to an increase in unemployment.
  • A potential decrease in business confidence leading to stifled growth.
  • A rework of existing pension contribution structures to recuperate the additional costs. This could either be a reduction in DC pension contributions or more of the NI saving from salary sacrifice schemes going to employers rather than employees.

“However, looking at the change specifically from a salary sacrifice pensions point of view, the increase in the Employer National Insurance rate makes providing a pension provision for employees more attractive for employers where pension contributions are paid via salary sacrifice.”

Inclusion of DC pension pots within Inheritance Tax

From 6 April 2027 unused pension pots and death benefits will be included for inheritance tax purposes. It is thought that this will affect a small percentage of estates each year.

On paper this somewhat restores the principle that pensions should not be a vehicle for the accumulation of capital sums for the purposes of inheritance.

 

Pensions triple lock retained

The triple lock will be applied in full to the State Pension in April 2025. This means that pensioners will receive an increase in line with the growth in national average earnings of 4.1%, ie an increase to the full State Pension of up to £470 pa.

In comparison this compares to a CPI inflation index growth statistic of 1.7% pa.

Sarah Garnish, a Consultant at Quantum Advisory, said:

“This year’s State Pension increase illustrates the value of the triple lock with the pension increasing by £470 pa whereas it would have only increased by £195 if it had been CPI-linked in isolation. This will come as somewhat of a relief to those pensioners in receipt of a state pension, who are struggling with the current cost of living and the recent cut in the winter fuel allowance.

“There remain larger discussions to be held on the State Pension in the future however as the structure is widely expected to be unsustainable in the long term, particularly with future demographic changes.”

What next for pensions?

The 2024 Autumn budget was prefaced with significant speculation on what may happen in the pensions landscape with some speculation reaching the front pages of the UK tabloids as recently as a week ago.

James Bird, a Consultant at Quantum Advisory, said:

“Discussions in the media around potential employer pension contribution taxation and a decrease in the maximum tax-free cash lump sum available ultimately proved more to be a lesson in how uncertainty in the pensions industry can drive consumer behaviour. For example, there is evidence that some individuals accelerated their tax-free cash lump sum plans and will now need to consider how to invest these tax-free cash lump sums to not make a loss.

“Overall, the pensions industry is in a finely balanced position as it is widely accepted that the majority of current pension systems will not provide a sufficient level of income for members in retirement. This has led to the Government initiating a review into pensions adequacy, balancing this with their desire to use pensions investment to boost growth in the UK economy.

“It was well reported before the budget that the Chancellor is an adept chess player and has learnt how to think several steps ahead through the game. At this stage I expect that the Chancellor has elected to make simpler changes elsewhere to recoup the current reported deficit in the nation’s finances at this stage. The wider stage to consider then how the pensions landscape will need to adapt will play out on the chessboard over the next years.

“With that said, the battle may have got significantly harder now that employer costs have increased further as part of this budget”

 

 

Law, News, South East

Rising tax burden threatens South East growth

As businesses continue to focus on recovery from the pandemic and speculation on the contents of the forthcoming Autumn Budget continues, Grant Thornton UK LLP’s latest Business Outlook Tracker finds that one in three (31%) mid-market businesses believe the increased tax burden is a top threat to the growth of their business.

The survey of 605 mid-market businesses in October 2021 showed that the increased tax burden was considered as big a threat to the market as digital security and cyber risk.

Businesses have already been hit this year with the upcoming rise in corporation tax to 25%, announced in the March Budget, and the recent announcement of a rise in National Insurance from April 2022 to help fund the health and social care sectors.

With changing tax policy placing ever greater strain on business finances, the survey found that the policies the mid-market would most like to see introduced by government to support business growth are led by measures to improve infrastructure (32%) and incentives for employers to invest in skills attraction and development (31%).

Backing for low carbon business strategies (30%), measures to level up the UK economy with more devolved powers (30%) and simplification of UK business tax systems (30%) all scored highly.

John O’Mahony, the practice leader for Grant Thornton’s Gatwick team, which covers Surrey, Sussex and Kent, commented: “There is never a good time to raise taxes but businesses around the South East will fear that’s inevitable. I’m sure what the community wants to see is a careful balancing act from the Chancellor. UK Plc is currently batting a perfect storm of issues from supply chain disruption, rising tax burden, lack of talent, increasing energy prices and rising uncertainty as we move towards winter.

“To gain the confidence of UK businesses, the government will need to show that they are able to deliver a clear path to, not just recovery, but also growth. As our research shows, businesses have long favoured a simplified UK tax system but, as the tax burden grows, we are yet to see any progress in this area.”

With COP26 on the horizon and the publication of the government’s Net Zero Strategy this week, it’s encouraging to see that policies around low carbon business strategies are a priority for the mid-market. We know from previous research that only 51% of mid-sized businesses have a net zero carbon strategy in place. To shift the dial in this area and to engage the market effectively in taking action, policy setters need to share clearer guidance that helps businesses to integrate net zero strategies into their operations, ensures the mid-market has access to funds and projects, and consolidates relevant reporting frameworks and standards.