Business owners may lose thousands of pounds under the new tax rules!

Business owners, are you sitting down? We need to be frank with you about the new tax rates. As owner-managed businesses ourselves, we’ve had to make some significant adjustments to our own business. It’s not been easy, and we want to share some of our strategies with you.  The sooner you can take action, the better.

1. Employer NICs

The increased employer National Insurance contributions have presented a significant challenge to employers, raising the cost of employment and reducing the earnings threshold for these contributions. This impact is particularly acute for businesses with large workforces or offering lower wages.

Our recommendation: Review your payroll forecasts immediately! Consider restructuring salary packages, adjusting your workforce, or investing in automation to counterbalance higher employer contributions effectively.

2. Increase to the National Minimum Wage and National Living Wage in the UK

This direct rise in wage bills also significantly impacts business owners, adding to their administrative and compliance burden.  In reality, it’s not just staff who earn minimum wage; these rises can also trigger wage compression, where employees earning just above the new minimum also expect raises. Businesses with limited pricing flexibility, such as those in retail, hospitality, or care, may find it difficult to absorb these costs without affecting profitability.

Our recommendation: Re-evaluate your workforce strategies. You can consider investing in automation or outsourcing specific roles. We have helped hundreds of companies outsource financial services such as bookkeeping, administration and payroll.  We are an international company with an office in Sri Lanka; we can help you explore alternative solutions at a much lower cost. Please get in touch with us to find out more.

Capital Gains Tax

Capital Gains Tax remains critical for owner-managed businesses and investors planning to sell shares or business assets. The increased Capital Gains Tax rates for business assets may seem manageable now, yet it adds a growing cost burden to disposals — especially for those who’ve relied on the more generous Business Asset Disposal Relief (formerly Entrepreneurs’ Relief).

This puts pressure on succession planning and business sales. Business owners considering an exit in the next two years should pay close attention — the difference between a sale in early 2025 and one delayed until 2026 could be tens of thousands of pounds in additional tax.

Our recommendation: If you’re considering selling or passing on a business, speak to us immediately to devise the most tax-efficient exit strategy.

3. Stamp Duty Land Tax rules:

The reversion of Stamp Duty Land Tax thresholds is unwelcome news for companies investing in property as an asset class or as part of operational expansion. This particularly affects commercial landlords, developers, and businesses with plans to relocate or grow their premises.

With the threshold drop, even relatively modest property transactions will now attract higher Stamp Duty Land Tax liabilities.

Our recommendation: Build higher Stamp Duty Land Tax costs into your development or acquisition models. Consider whether holding off or bringing forward purchases could save tax.

4. Benefits, Tax Bands, and Frozen Thresholds

Many personal tax bands are currently frozen, resulting in an inflationary effect. As wages and profits increase by inflation, more income is subject to higher tax bands. This subtly imposes a heavier tax burden on individuals and business owners who receive remuneration through Pay As You Earn (PAYE) and dividends.

In addition, the values associated with car and van benefits are rising, particularly affecting higher-emission company vehicles. This trend continues to incentivise the transition to electric cars; however, it may lead to increased costs in the short term.

Our recommendation: We advise all clients to undertake a comprehensive review of company car policies, salary sacrifice schemes, and dividend strategies. Delaying such actions until the close of the tax year may restrict options for making appropriate adjustments.

These tax changes are tricky to navigate and may significantly impact your profit. By taking action now and adapting your investment decisions and recruitment strategies, you can prevent your business from losing thousands of pounds in tax.

Click here for a summary of the new Tax Rates or get in touch to find out more about how we can help you create a tax-efficient business strategy: