Autumn Budget 2024: A business perspective from Dow Schofield Watts
The Budget brings a mix of tax hikes, policy shifts, and investment promises, with the intent to stabilise the nation’s finances amid an unpredictable economic climate. Dow Schofield Watts’ team of experts weighs in on how these changes may impact businesses, entrepreneurs, investors, and the broader economic landscape.
Increasing pressures on employers and small business owners
With this Budget, the government has announced significant tax increases targeting business owners, investors, and higher earners. Tax partner Andrew Robinson observes that while there was considerable pre-budget concern over potential capital gains tax (CGT) increases, the real impact lies elsewhere:
“The initial reaction to CGT changes wasn’t bad, but the devil is in the detail, and the Employers’ National Insurance and minimum wage hikes could significantly impact the country’s economic stability. The Employers’ National Insurance contribution increase of 1.2% may seem manageable alone, but combined with a reduction in the secondary threshold from £9,100 to £5,000, the burden grows heavier for smaller businesses.”
Dow Schofield Watts’ founder, James Dow, shares similar concerns:
“The tax increases announced today are almost exclusively created through substantial hikes in employers’ National Insurance. When combined with the forthcoming Employment Bill, the price of labour has shifted upwards. This should encourage further capital investment, which the UK badly needs, but it will inevitably have consequences on employment prospects. It’s not a great time to be an employer.”
Corporate finance partner Roger Esler adds that, given the rising costs, businesses will need to explore avenues for productivity gains:
“These significant changes amount to a material hike in business costs, with a risk of being passed on to customers and/or recovered through employment cost savings. They will take some time to ripple through the economy and their overall impact isn’t determinable exactly at this point. In the short term, it deters job creation and means lower margins and less cash for businesses to invest. It could, of course, prove to be an incentive to increase productivity per capita, particularly if incentives for investment in skills, and technology are enhanced – more detail on this is imperative.”
Capital Gains Tax: Not as severe, but impactful for lower earners
The CGT increase, while not as high as feared, nonetheless reflects a sharp jump, especially for basic-rate taxpayers. Andrew Robinson emphasises the strain this places on lower earners:
“For basic rate taxpayers earning up to £50,270, the increase to 18% represents a substantial rise in capital gains liabilities should they sell chargeable assets. The changes do come as a blow to investors, and more importantly, companies seeking that investment, who have already seen their annual allowance slashed from £12,300 to £3,000 since 2022/23.”
Corporate finance partner Gerard Lucas shares a cautiously optimistic view, noting that while the 4% rate increase is significant, it’s unlikely to radically change most shareholders’ long-term actions:
“For shareholders currently looking to realise their investment, the immediate increase in the top rate of CGT from 20% to 24% will be disappointing. However, it is unlikely to directly change the decision making of most, and the delay in reducing the increase in the rate of business asset disposal relief to April will be welcomed by those who qualify.”
Esler further points out that, while CGT rates have risen, they still remain below income tax rates, which may encourage some entrepreneurs to pursue certain exit strategies:
“The higher rate of CGT could make growth capital, partial exits, and secondary buyouts more interesting to business owners than an outright sale, where owners take some equity value off the table but also roll some over into a new ownership structure. All things considered, and after weeks of negative briefings, this is as good news as we could have hoped for in the deal market.”
Supporting UK innovation amidst higher taxes
Tax partner Shenal Wijetunge appreciates the government’s decision to maintain the existing R&D tax relief and Patent Box incentives:
“By keeping R&D tax relief and the Patent Box intact, the Budget has provided some welcome stability, which is essential for supporting UK innovation allowing businesses to move forward confidently with R&D investments. However, it’s important to note that correctly and accurately identifying and quantifying R&D activities is the first essential step in a robust and compliant R&D Tax Relief Claim process.”
DSW Ventures partner Keith Benson underscores the importance of these incentives for early-stage companies and welcomes the decision to keep the EIS and Seed EIS schemes:
“EIS and Seed EIS schemes were left untouched, and the Chancellor identified the critical role the EIS and VCT schemes play in creating a positive environment for UK entrepreneurship. These schemes already offer very generous tax benefits, and with higher tax bills on the horizon, they become even more appealing.”
With this favourable climate for EIS, DSW Ventures is set to launch the DSW Ventures Seed EIS Fund 2, positioning itself to attract investors seeking tax relief opportunities.
Changes to Inheritance Tax and their impact on family businesses and agriculture
One of the most surprising elements of the Budget is the accelerated timeline for CGT rate changes, which took effect immediately on 30 October rather than in April 2025. Robinson notes that this could disrupt the planning of asset sales, impacting family businesses and small enterprises:
The IHT changes could have an even broader impact, especially for farmers and family-owned businesses. From 2026, adjustments to Business Property Relief and Agricultural Property Relief may require multi-generational farms to reassess succession plans.
“The new IHT rules are a major concern for farmers and multi-generational family businesses,” Robinson explains. “It is unlikely that the families involved are able to afford any IHT bill in the event of a death and will therefore be required to sell land to pay any liability.”
James Dow highlights how these new rules may prompt increased use of trusts for estate planning, as families seek to protect assets from large IHT bills:
“These new IHT rules will inevitably mean estate planning and the use of family trusts and personal investment companies are set to become hot topics for families. And the continued freeze on IHT allowances will make IHT planning an inevitable fact of life (and death) for many more families.”
Adding to these concerns, inherited pensions will now fall under the IHT scope from 2027, removing a longstanding vehicle for tax-efficient wealth transfer. Robinson predicts that this change will deter retirees from saving their pension assets:
“The inclusion of inherited pensions in IHT will encourage the spending of savings rather than preserving the funds for their children or grandchildren. In addition to this, pension payments received after death are subject to income tax when received by beneficiaries. There was no mention of this in the budget documents, which potentially exposes beneficiaries to an overall tax liability of between 60 and 85% on inherited pensions. A key point which I’m sure will be raised in consultation.”
Investing in public infrastructure: A welcome but cautious development
The Budget’s commitment to public infrastructure investment includes hospitals, schools, and transportation, particularly in the North. James Dow appreciates the emphasis on regional investment, though he cautions against overly optimistic outcomes:
“The UK has been plagued by chronic under investment in public infrastructure (particularly in the North of England), in part held back by government ‘cash accounting’. This is an important shift, but your enthusiasm for this change will largely depend on your confidence in civil servants to deploy such enormous sums of capital, with or without ‘guard rails’.”
Business planning partner, Ellen Little, supports the establishment of the Office for Value for Money to ensure public investment outcomes are monitored:
“The creation of an Office for Value for Money is a positive move to ensure ongoing measurement and capture of the benefits and output of public sector investment. In the past, the measurement of benefits post spend has been an area which is not often well reported, and it must be to allow lessons to be learnt and enable the maximisation of these benefits going forward.
“The committed investment in hospitals, schools, housing, and transport is much needed to address the poorly maintained public estate. We need to learn from the past and ensure the sustainability of the assets created/ developed, both from a future flexibility and affordability perspective.”
Navigating an increasingly complex fiscal landscape
The Budget introduces significant tax increases, particularly on employers, investors, and small businesses, alongside reforms that may restrict long-term planning for family businesses. While certain tax reliefs and infrastructure investments signal support for innovation and growth, experts from Dow Schofield Watts caution that these changes could impose new burdens on businesses already facing economic pressures.
