The UK Autumn Budget of 2024 introduces significant changes that directly affect business loans and funding options for small and medium-sized enterprises (SMEs). These measures aim to stabilise the economy while fostering growth in strategic sectors. From revised tax policies to targeted relief and incentives, the budget reshapes the financial landscape for businesses seeking loans or other financial support. Here’s a breakdown of how these updates impact access to business loans and funding for UK companies.
1. Government-Backed Investment and Sector-Specific Support
One of the budget’s key pillars is promoting economic stability through government-backed investment, especially in high-growth sectors like technology, life sciences, and renewable energy. The government has pledged over £20 billion toward research and development (R&D), with a particular emphasis on emerging industries. This investment not only supports innovation but also improves the loan prospects for companies in these fields, as banks and lenders are more likely to view these industries as low-risk due to government support and projected growth.
For example, companies in sectors with dedicated government funding may find it easier to secure favourable loan terms or access grants, reducing their reliance on high-interest debt. This could be especially beneficial for startups and small firms aiming to scale quickly without taking on excessive debt.
2. Enhanced Employment Allowance Reduces Operating Costs
To further support SMEs, the budget increases the Employment Allowance from £5,000 to £10,500, exempting many smaller businesses from paying National Insurance contributions. This allowance aims to ease financial burdens, allowing businesses to redirect these savings toward growth activities like hiring, research, or loan repayment.
While the budget does introduce an increase in employer National Insurance contributions from 13.8% to 15%, this adjustment mainly affects larger companies with payrolls that exceed the allowance threshold. For many SMEs, this change represents a substantial cost reduction, potentially improving their creditworthiness and attractiveness to lenders.
3. Tax Relief and Corporate Tax Roadmap
Another notable feature of the budget is the newly introduced corporate tax roadmap, which caps corporation tax at 25% for the foreseeable future, marking the lowest rate in the G7. This move aims to offer businesses long-term stability and predictability, critical for companies planning investments that require long-term financing.
For SMEs, a stable corporate tax rate lowers financial risk, creating a more favorable environment for securing business loans. Companies can also benefit from targeted tax reliefs introduced in the budget, including relief for businesses in the hospitality, retail, and leisure sectors. Businesses in these areas will receive a 40% relief on their business rates for 2025-2026, capped at £110,000 per business. Such reductions ease overall financial strain and may lead to improved loan conditions.
4. Increased Capital Gains Tax and Implications for Business Financing
The budget introduces an increase in capital gains tax (CGT) rates, impacting both basic and higher-rate taxpayers. With CGT for business assets rising to 18% for basic rate and 24% for higher-rate taxpayers, business owners may face higher costs when selling their business assets or exiting an investment. This change could make some businesses reconsider their approach to financing, potentially opting for debt over equity financing to delay capital gains tax liabilities.
These changes may also impact businesses that rely on investor financing, as the adjusted tax burden could shift investor preferences toward more tax-efficient structures. SMEs seeking equity-based funding or planning for eventual buyouts will need to consider these changes carefully when structuring their financing options.
5. Business Rates Reform and the High Street
In response to ongoing challenges faced by retail, hospitality, and leisure businesses, the budget proposes a permanent lower business rates multiplier for these sectors, slated to begin in 2026-27. Additionally, a temporary relief of 40% on business rates for these sectors in 2025-26 will provide immediate financial support. This could allow businesses to improve their cash flow, which is crucial for loan applications, as lenders often assess liquidity and stability as primary factors.
This business rates relief, combined with other support measures, is part of the government’s broader strategy to reinvigorate the high street and support small businesses. For firms in these sectors, this relief translates to more accessible financing, as reduced fixed costs make businesses more attractive to lenders.
The Autumn Budget 2024 presents both opportunities and challenges for businesses in the UK. On one hand, increased government investment in R&D and high-growth sectors, combined with measures like the enhanced Employment Allowance, provides a more stable foundation for securing business loans. On the other hand, tax increases, particularly around capital gains, present new considerations for businesses seeking to balance debt and equity financing.
Overall, this budget underscores the government’s commitment to fostering a supportive environment for SMEs, particularly in sectors vital to the UK’s economic future. By understanding these changes, businesses can better navigate the financial landscape and leverage available support to secure funding and drive sustainable growth.