We have highlighted the key changes which are likely to impact the Professional Services sector.

Employers National Insurance contributions

From April 2025 Employers National Insurance will increase by 1.2% to 15%. As employment costs for the Professional Services Sector can comprise over 40% of expenditure, this is likely to create a significant increase in costs. An increase in Employment Allowance from £5,000 to £10,500 will go some way to offset this for smaller business, but this is likely to have little impact for businesses with larger teams. Financial budgets for 25/26 will need to factor in this 1.2% increase in cost alongside the implications for future charge out rates.

Income tax and National Insurance

The tax rates will not change but thresholds have remained frozen until 28/29. With the impact of inflation, this is effectively an increase in tax rates for all business owners whether they receive income as a self-employed individual, partner or shareholder.

Corporation Tax

For Professional Services businesses operating through a limited company, they now have certainty that Corporation Tax rates will not increase above 25% until the next election.

Capital Gains Tax

The lower rate threshold has increased, effective from today, from 10% to 18% and the higher rate from 20% to 24%. This could impact business owners who are considering selling their business or bringing new partners into the business to allow for succession. The Business Asset Disposal Relief (BADR) £1m lifetime allowance has been retained, but the effective rate of tax after BADR is set to increase in April 2025 from 10% to 14% and then to 18% in April 2026. This valuable relief is often part of our tax planning advice to owners considering an exit from their business who will now pay at least 8% more tax from April 2026 if they sell their business assets.

Inheritance tax

Business owners have historically been re-assured that should they die holding their share of a business asset, no Inheritance Tax would be due, assuming this was eligible for Business Property Relief. This ensured that the business did not need to fund tax liability on death – potentially by breaking up the business.  Business Property Relief is now set to radically change from April 2026 with only the first £1m being eligible for relief and any balance suffering an effective tax rate of 20%. Business owners may need to reconsider their Will planning and whether insurance will be needed to protect the business.

The impact of the Budget is not just about how this effects businesses and owners within the Professional Services Sector directly. The success of our sector often depends on the success of the clients we are serving. The announcements in the Budget today will impact our clients in different ways and is likely to drive behaviour which could impact growth. For example, the increase in Stamp Duty Land Tax for additional properties may result in a reduced number of completions for a conveyancing solicitor, whilst the planned increase in capital gains tax after Business Asset Disposal Relief from April 2025 is likely to mean that Corporate solicitors will be exceptionally busy in the lead up to the tax year end.

Watch our Autumn Budget 2024 question time webinar

Following the Autumn Budget 2024, our panel of experts examined the announcements made by The Chancellor, discussing what these changes mean for you. They also answered questions from our live audience. This webinar is now available to watch on demand here.

Alternatively, if you would like any further information or guidance on this topic, get in touch with your usual Kreston Reeves contact or contact us here.