The latest Budget brings a wave of adjustments for small and medium-sized enterprise (SME) owners.
With increases in employer National Insurance (NI), Capital Gains Tax (CGT) rates, and adjustments to Inheritance Tax (IHT) relief, the new measures mean that business owners should carefully review their personal and business financial strategies.
Doing so can help SME owners use this as a time to strengthen their financial approach and prepare for sustainable growth.
Rethinking workforce costs with National Insurance changes
Starting April 2025, the employer NICs rate will increase to 15 per cent, with a reduced threshold of £5,000.
These adjustments will inevitably lead to higher payroll expenses, impacting already tight budgets for many SMEs.
Instead of viewing this as just an added cost, it is an opportunity to reassess workforce structure.
Adjusting the balance between salaried employees and contractors, exploring flexible roles, and preparing for cash flow adjustments can help ease the burden of increased contributions.
Capital Gains Tax adjustments and personal asset planning
With CGT rates now at 18 per cent for lower bands and 24 per cent for higher bands, owners have fresh motivation to consider how best to manage personal assets.
Thoughtful planning around asset sales and structures could mitigate these tax increases, and options such as phased transfers, setting up trusts, or balancing personal investments can be effective tools for long-term wealth protection.
Tackling rising labour costs
An increase in the national living wage to £12.21 per hour means many SMEs will see a 6.7 per cent rise in wage expenses.
While higher wages benefit employees, they also require thoughtful adjustments to maintain profitability.
Look at this as a chance to explore efficiency-boosting strategies. Are there ways to streamline processes, automate tasks, or improve workflows to absorb these costs without compromising service quality?
Adapting in this way could leave your business stronger and more resilient.
Planning for Inheritance Tax changes in the future
Changes to IHT relief, effective from April 2026, limit full relief on business and agricultural assets to the first £1 million, with a 50 per cent rate on assets beyond that threshold, resulting in a 20 per cent effective tax rate on higher-value estates.
Additionally, unlisted shares including those on AIM will now only qualify for 50 per cent relief, regardless of value.
SME owners should consider options like trusts and lifetime transfers to maximise current reliefs and protect family succession plans.
Making the most of business rates relief and Employment Allowance
Extended business rates relief for retail, hospitality, and leisure businesses, alongside an increased Employment Allowance to £10,500, offers a way to offset some of the new expenses.
Using these benefits strategically can free up cash flow to reinvest in growth initiatives or future-proof your operations.
For SME owners, this Budget presents both challenges and opportunities.
Contact us today for advice on how to take advantage of these adjustments and keep your finances in good health.
