The Autumn Budget 2024 has brought a wave of changes that will impact the tech sector. From adjustments in employer costs to the increase in Capital Gains Tax (CGT) rates, these changes are set to reshape the financial landscape for tech companies and their employees. Let’s dive into the key points and what they mean for UK tech.
R&D Relief is retained
The great news for technology companies that drive innovation through research and development to is that the Autumn Budget has retained the existing R&D Expenditure Credit Scheme and the Enhanced Support for R&D Intensive small and medium-sized businesses.
The Government’s decision to maintain these schemes means that tech companies can continue to benefit from tax credits on their R&D investments, encouraging them to push the boundaries of technology and innovation.
Increase in Capital Gains Tax (CGT)
The increase in CGT rates is a significant change that will affect many in the tech sector. From 30th October, the main rates of CGT rose from 10% (for basic rate taxpayers) and 20% (for higher and additional rate taxpayers) to 18% and 24%, respectively.
This increase is particularly relevant for tech entrepreneurs and investors who often rely on capital gains from the sale of shares and other assets.
Impact on EMI Share Options
Enterprise Management Incentive (EMI) share options have been a popular tool for tech companies to attract and retain talent. However, the increase in CGT rates will affect the benefits of EMI share options. Employees who exercise their EMI options and sell their shares will now face higher CGT rates, reducing the overall financial benefit.
This change may prompt tech companies to revisit their compensation strategies and explore alternative incentives to keep their top talent motivated.
Business Asset Disposal Relief
Business Asset Disposal Relief (formerly known as Entrepreneurs’ Relief) has also seen changes. The CGT rate for qualifying disposals will increase from 10% to 14% starting April 2025, with further increases planned for subsequent years.
While this is still lower than the new main CGT rates, it represents a significant increase from the previous rate. Tech entrepreneurs considering business exits or partial investments should act promptly to lock in the lower tax rates before the April 2025 increase
Employer Costs and National Insurance (NICs): A New Challenge
One of the most significant changes in the Autumn Budget is the increase in employer NIC rates. This increase creates pressure on business budgets, affecting recruitment plans and potentially wages.
For tech companies, which often have a high number of skilled employees, this increase can be particularly challenging. Many tech firms are evaluating strategies to manage this added cost, such as adopting salary sacrifice schemes to reduce the additional NIC burden while maintaining employee benefits levels. This approach can help tech companies manage payroll tax liabilities without compromising on the benefits offered to their employees.
Additionally, tech companies may benefit from proactively preparing a plan for calculating the NIC increase effects on their budgets. This could involve detailed budget planning and forecasting to ensure that the increased costs are managed effectively. By doing so, tech companies can continue to invest in their workforce and maintain their competitive edge in the market.
Navigating the Changes
The Autumn Budget 2024 brings both opportunities and challenges for the tech sector. While the retention of R&D relief is a positive step, the increase in CGT rates and changes to Business Asset Disposal Relief will require careful planning and strategic adjustments. Tech companies should work closely with their financial advisors to navigate these changes and ensure they continue to thrive in this evolving landscape.
In conclusion, the Autumn Budget 2024 is a reminder of the ever-changing nature of the financial environment. By staying informed and proactive, tech companies can turn these changes into opportunities for growth and innovation.
Get in touch
If you have any questions about any of the topics discussed in this article, get in touch with one of our experts here at Gravita.
