Financial and Tax Insights

Budget 24: Business Tax, NICs & VAT

Ahead of the Budget, there was much concern that it would be businesses that would bear the brunt of any tax raising measures and to a great extent this has been born out by the measures announced. So in this Budget 24 Summary article, we take a look at the changes to Corporation Tax, NICs and VAT.

As always, however, you should contact us before taking any action as a result of the contents of this summary, or if you need any further help or support.

Entrepreneurs and Businesses - Business Tax

Corporation tax rates

The government has confirmed that the rates of Corporation Tax will remain unchanged, which means that, from April 2025, the rate will stay at 25% for companies with profits over £250,000. The 19% small profits rate will be payable by companies with profits of £50,000 or less. Companies with profits between £50,001 and £250,000 will pay tax at the main rate reduced by a marginal relief, providing a gradual increase in the effective Corporation Tax rate.

Capital allowances

The Full Expensing rules for companies allow a 100% write-off on qualifying expenditure on most plant and machinery (excluding cars) as long as it is new and unused. Similar rules apply to integral features and long life assets at a rate of 50%. The government will explore extending Full Expensing to assets bought for leasing or hiring, when fiscal conditions allow.

The Annual Investment Allowance is available to both incorporated and unincorporated businesses. It gives a 100% write-off on certain types of plant and machinery up to certain financial limits per 12-month period. The limit remains at £1 million.

The 100% First Year Allowances (FYA) for qualifying expenditure on zero-emission cars and the 100% FYA for qualifying expenditure on plant or machinery for electric vehicle charge points have been extended to 31 March 2026 for corporation tax purposes and 5 April 2026 for income tax purposes.

National Insurance Contributions

The Chancellor announced major changes to the National Insurance contributions (NICs) system.

Employees and NICs

From 6 April 2024 the main rate of Class 1 employee NICs is 8%. The employer rate is 13.8%.

The government announced that it will increase the employer rate from 13.8% to 15% from 6 April 2025.

The Secondary Threshold is the point at which employers become liable to pay NICs on an individual employee’s earnings, and is currently set at £9,100 a year. The government will reduce the Secondary Threshold to £5,000 a year from 6 April 2025 until 6 April 2028, and then increase it by Consumer Price Index (CPI) thereafter.

The Employment Allowance currently allows businesses with employer NICs bills of £100,000 or less in the previous tax year to deduct £5,000 from their employer NICs bill. From 6 April 2025 the government will increase the Employment Allowance from £5,000 to £10,500, and remove the £100,000 threshold for eligibility, expanding this to all eligible employers with employer NIC bills.

The self-employed and NICs

From 6 April 2024 the rates of Class 4 self-employed NICs are 6% and 2%. These rates remain the same from 6 April 2025.

For Class 2 NICs from 6 April 2024:

Self-employed people with profits of £6,725 and above get access to contributory benefits, including the State Pension, through a National Insurance credit, without paying Class 2 NICs
Those with profits under £6,725 and others who pay Class 2 NICs voluntarily to get access to contributory benefits including the State Pension will continue to be able to do so.

Other changes for 2025/26

The government will increase the Lower Earnings Limit (LEL) and the Small Profits Threshold (SPT) by the September 2024 CPI rate of 1.7% from 2025/26. For those paying voluntarily, the government will also increase Class 2 and Class 3 NICs by 1.7% in 2025/26.

The LEL will be £6,500 per annum (£125 per week) and the SPT will be £6,845 per annum. The main Class 2 rate will be £3.50 per week and the Class 3 rate will be £17.75 per week.

Employer NICs relief for veterans

The government is extending the employer NICs relief for employers hiring qualifying veterans for a further year from 6 April 2025 until 5 April 2026.

This means that businesses will continue to pay no employer NICs up to annual earnings of the Veterans Upper Secondary Threshold of £50,270 for the first year of a veteran’s employment in a civilian role.

National Living Wage and National Minimum Wage

The government has announced increased rates of the National Living Wage (NLW) and National Minimum Wage (NMW) which will come into force from 1 April 2025. The rates which will apply are as follows:

	NMW Rate £	Increase £	Increase %
National Living Wage (age 21 and over)	12.21	0-77	6.7
18-20 year old rate	10.00	1.40	16.3
16-17 year old rate	7.55	1.15	18.00
Apprentice rate	7.55	1.15	18.00

The apprenticeship rate applies to apprentices under 19 or, if 19 and over, in the first year of apprenticeship only. The NLW applies to those aged 21 and over.

VAT

The VAT registration threshold

From 1 April 2025, the VAT registration threshold remains at £90,000 and the deregistration threshold at £88,000.

Removal of VAT exemption for private school fees

Private school fees for education and vocational training will no longer benefit from VAT exemption and will be subject to VAT at the standard rate (20%). The change will apply to terms beginning on or after 1 January 2025 although certain prepayments made after 29 July 2024 will also be included.

More Budget insights

In our next article, we will take a look at the changes to Company Vehicles, Business Rates & Relief but you can find all our insights in respect of the recent Budget here:

Please get in touch for advice before you take any action in respect of the Budget or contents of this article.