UK Business Tax Changes: What You Need to Know in 2024 and Beyond

In recent months, the UK government has introduced several tax changes affecting businesses across the nation. Understanding these updates is crucial for business owners to navigate the evolving financial landscape effectively.

1. Corporation Tax Adjustments

As of April 2023, the main rate of Corporation Tax increased from 19% to 25% for companies with profits exceeding £250,000. Businesses with profits under £50,000 continue to benefit from the 19% small profits rate, while those with profits between £50,000 and £250,000 face a tapered rate. This structure aims to ensure that larger, more profitable companies contribute a fairer share, while smaller businesses receive some relief.

2. National Insurance Contributions (NICs) Increase

Effective from April 2025, Employer's National Insurance contributions will rise from 13.8% to 15%. This change represents a significant additional payroll cost for employers, even after accounting for the associated corporation tax deduction.

3. Capital Gains Tax Reform

The government has announced an increase in the Capital Gains Tax rate on carried interest from 28% to 32%, effective April 2025. This change affects fund managers and investors, aiming to align tax rates more closely with income tax levels.

4. VAT Registration Threshold Adjustment

From April 2024, the VAT registration threshold for UK-established businesses will increase from £85,000 to £90,000 in annual turnover. This adjustment allows smaller businesses to grow slightly more before being required to register for VAT, potentially reducing administrative burdens for emerging enterprises.

5. Abolition of Non-Domiciled Tax Status

Starting April 2025, the government will abolish the non-domiciled tax status, which previously allowed individuals residing in the UK to limit tax on foreign income. This significant reform aims to increase tax fairness and is expected to impact many high-net-worth individuals and the businesses they influence.

6. Full Expensing Made Permanent

In a move to encourage business investment, the government has made permanent the full expensing policy, allowing companies to deduct the entire cost of qualifying plant and machinery investments from their taxable profits. This incentive supports businesses in upgrading equipment and expanding operations, fostering economic growth.

Implications for Businesses

These tax changes reflect the government's strategy to balance fiscal responsibility with economic stimulation. While some measures increase tax burdens, others provide reliefs designed to spur investment and growth. Businesses should remain informed about these developments and monitor how they impact their financial and operational decisions.