For a self-employed individual operating through a limited company with a turnover of less than £5 million, the Autumn Budget 2024 includes several measures that can impact your business, particularly in terms of tax reliefs, investment incentives, and support for smaller companies.
Below is a summary of the key provisions relevant to you:
1. Corporation Tax
Corporation Tax Rate:
The standard corporation tax rate is 25% for profits over £250,000.
However, if your company’s profits are below £50,000, you will continue to pay the small profits rate of 19%.
Marginal Relief applies to businesses with profits between £50,000 and £250,000, meaning your company could benefit from a gradual tax rate transition between 19% and 25%, depending on your exact profits.
Since your turnover is less than £5 million, you are most likely to fall under the lower thresholds and may benefit from 19% corporation tax or marginal relief, depending on your profits.
2. Full Expensing for Capital Investments
The Full Expensing scheme, which allows businesses to write off 100% of the cost of qualifying capital investments in the year of purchase, has been extended for another year. This is highly beneficial for small businesses and limited companies looking to invest in:
New equipment
Technology
Energy-efficient improvements
Office or operational infrastructure
This means if you make significant capital investments (e.g., upgrading office equipment or purchasing new machinery), your business can deduct the full cost from its taxable profits for the year in which the purchase is made.
3. Research and Development (R&D) Tax Relief
The government has enhanced the SME R&D Tax Relief, which supports small and medium-sized businesses investing in innovation. This could be particularly beneficial if your company is involved in:
New product development
Technological improvements
Process innovation
If your business is spending on R&D (even in small amounts), you may be able to claim back a proportion of your expenditure from HMRC, effectively reducing your tax bill.
4. Dividend Tax and Tax-Free Allowances
Dividend Tax Allowance: The £1,000 dividend tax allowance remains unchanged for the 2024/25 tax year. Any dividends above this amount will be taxed at:
8.75% for basic rate taxpayers
33.75% for higher rate taxpayers
39.35% for additional rate taxpayers
As a self-employed individual operating through a limited company, this remains an important tax planning tool. Dividends are typically used by business owners to extract profits from the company in a tax-efficient manner, and this £1,000 tax-free dividend allowance will continue for the 2024/25 tax year.
5. National Insurance Contributions (NICs)
National Insurance for small businesses and self-employed individuals remains largely unchanged, with Class 1 NICs applied to salaries drawn by directors of limited companies.
Class 2 NICs will apply if you are self-employed and earning over the threshold (currently £12,570 per year). However, as you are operating through a limited company, your NICs will primarily be based on your salary.
Employment Allowance: If your company employs staff, you may still qualify for the Employment Allowance (which reduces Employer NICs by up to £5,000 per year), potentially reducing your overall tax and NICs burden if you employ a few staff members.
6. Capital Gains Tax (CGT)
CGT on the Sale of Assets: If you sell assets (e.g., business property or shares in your company), CGT will apply to the profit. For limited companies, CGT is due when the company disposes of assets (subject to exemptions, like if you're selling assets as part of a trade sale).
The annual exempt amount for CGT for individuals remains at £6,000 (as of 2024/25), and for companies, there’s no similar exemption — the full gain will be subject to tax.
If your business sells shares or assets, the tax liability will depend on your company's valuation and any applicable exemptions.
7. Business Rates and Reliefs
While most business rates relief schemes are targeted at small businesses with commercial properties, if your company occupies a small office space or has some commercial property, you may qualify for Small Business Rate Relief (SBRR), which provides relief for businesses with a low rateable value.
The government has confirmed that reliefs aimed at small businesses facing high property taxes will continue, though the impact will vary depending on the nature of your business and property holdings.
8. Green Investment and Energy Efficiency
If your limited company is involved in making energy-efficient upgrades or investing in green technologies, there are various incentives available to encourage sustainability. For example:
Full expensing can apply to energy-efficient assets, such as installing solar panels, LED lighting, or electric heating systems.
Grants and incentives for green technology (e.g., electric vehicle charging stations for your business) may also be available depending on the nature of your operations.
The government continues to support businesses making environmentally sustainable investments, which can benefit limited companies looking to upgrade their properties or operations.
9. Support for Employment and Wage Growth
If your limited company has up to 5 employees, there are initiatives to support wage growth and employment in small businesses. This includes:
Apprenticeship incentives
Support for skills training for employees
NICs incentives for small employers
The government continues to encourage small businesses to hire and invest in their workforce, especially through schemes aimed at providing training and development opportunities for employees.
10. Simplified Tax Filing and Administrative Support
As part of the broader move towards digitalizing the tax system, the government is working on simplifying administrative processes for small businesses, including self-employed individuals operating through limited companies. This could help reduce the complexity of tax filings and compliance.
11. Cost of Living and Financial Support
Although much of the cost-of-living support is focused on households, there are ongoing measures that could indirectly benefit small business owners:
Energy support schemes to help with business utility bills, particularly during high energy-cost periods.
The National Living Wage has increased, which could affect businesses employing staff.
Summary of Key Takeaways for Self-Employed Individuals with a Limited Company (Earning Less Than £5 Million):
Corporation tax: Remains at 19% for profits under £50,000, or up to 25% for higher profits. The marginal relief provides a gradual increase between the two rates for profits between £50,000 and £250,000.
Full expensing continues, allowing your business to write off 100% of the cost of qualifying capital assets, such as equipment or property improvements.
R&D tax relief has been enhanced for small businesses engaged in research and development activities.
Dividend tax allowance stays at £1,000, and dividends above this are taxed at 8.75%, 33.75%, or 39.35% depending on income.
NICs for directors and employees remain the same, with opportunities for employment allowances and NICs reductions for small employers.
Business rates relief continues for smaller businesses with commercial properties, and green investment incentives are available for environmentally-friendly improvements.
In summary, the Autumn Budget 2024 offers continued support for smaller limited companies, with particular focus on tax reliefs, capital allowances, and sustainability initiatives, while keeping many provisions for small businesses stable to help them grow, innovate, and remain financially efficient.
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