Autumn Budget 2024 Commentary: Technology

As promised, the Chancellor did not raise ‘taxes for working people’, i.e. income tax and employee’s National Insurance. Nor has the Chancellor increased VAT. However, employers in the tech sector will face an increase in employer’s National Insurance contributions. Not only is the percentage rate of employer’s NICs rising from 13.8% to 15%, but the threshold at which this will be charged is reducing from £9,100 to £5,000. This could be a significant increase in wage costs for larger tech employers.

For smaller tech businesses however, the employment allowance, which is a deduction against the overall employer’s National Insurance bill in a tax year, is increasing to £10,500. This will mean that smaller businesses may see their employer’s NICs bill slashed.

The National Minimum Wage is also increasing for 18-20 year old to £10 per hour, and t he National Living Wage will increase to £12.21 for all employees in April 2025. Whilst this may be welcome news for the workers, this will further add to the cost of hiring staff.

The increase in tax we all expected to see was lower than we predicted but it is increasing, and it is effective immediately. The lower rate of CGT is increasing from 10% to 18%, and the higher rate is increasing from 10% to 24%, which puts the ‘normal’ CGT rates in line with those on residential property. This could have been a lot worse, as it was predicted the upper rate could increase to anywhere between 30% and 45%.

Happily the Chancellor announced no changes to the Business Asset Disposal Relief lifetime allowance of £1m, however tax planning may become important for those in tech looking to exit soon as the capital gains tax rate on disposals eligible for BADR is increasing from 10% in April 2025 to 14%, and then to 18% in April 2026 where it will stay.

The increases in CGT further enhance the importance of the use of the Enterprise Investment Scheme which can give qualifying investors a tax free exit, and some tech founders may even be able benefit from this regime themselves depending on the structure of their business.

A number of tech related task forces and pilots have been announced, highlighting the Government’s intention to increase the use of tech, particularly across SMEs with the Digital Adoption Taskforce. There are also proposed investments in aerospace technology, and greener tech within the automotive industry.

The Government has identified the digital and technologies sector as a growth sector and intend to drive that growth by investing in digital infrastructure throughout the country, and in creating a new National Data Library.

The Chancellor also announced that there would be no further changes to the R&D scheme – welcome news from an administrative point of view, given all the updates in recent times, and it is unsurprising that the relief has not been increased.

The Government already announced investment in HMRC and we can expect to see increased compliance activity from HMRC over time. A point of note for individuals or businesses entering into Time To Pay arrangements where you may need additional time to pay tax liabilities, is that the late payment interest rate will be increasing by 1.5 percentage points in April 2025. The interest rate is currently 7.5% which is already quite high, so for smaller tech businesses who may be struggling to pay their tax liabilities, it may be worth considering alternative sources of finance before jumping into a payment arrangement with HMRC.