Let’s break down the key points from Rachel Reeves’ first budget speech that will impact the digital economy. As a co-founder or owner in the e-commerce sector, understanding these changes is crucial for improving productivity and moving in the right direction. How will the budget 2024 impact your ecommerce business?
For both small and medium enterprises in digital commerce, this budget brings several changes that could impact your cash flow. The government wants to raise revenue via taxes while also not increasing tax on working people..
First the good bits from the UK Budget 2024
If you’re operating as operating have a small team on payroll, you’ll be pleased to know that the Employment Allowance is increasing to £10,500
This means you can employ up to four people at National Minimum Wage levels without being impacted by the upcoming NICs changes
The existing cuts to National Insurance for employees are being maintained
Full expensing and Annual Investment Allowance (AIA) for business equipment will continue – great news if you’re planning to invest in your business
There is no change to income tax
Bad bit from the Budget 2024 for ecommerce: Changes to National Insurance Contributions
Here’s what you need to know about the NICs changes:
Employer NICs are increasing to 15% from 2025 (up by 1.2%)
The Employer Secondary Threshold is reducing to £5,000 (from £9,100)
However, don’t panic! If you’re a small ecommerce business, the increased Employment Allowance of £10,500 should offset these changes for most of you
What This Means For Your ecommerce Business
Director only payrolls: If you are the only one one payroll and paying yourself £9096 per year to not pay NI, save corporation tax and still contribute to your NI contribution and state pension. Then this change does impact you. This is because they cut the secondary threshold to £5000. This is the rate in which you start paying employer’s national insurance.
We are exploring the options but to ensure you maintain the national insurance and pension contributions we would suggest paying yourself £9096 but this will cost you £614.40 in national insurance.
You could choose to pay yourself £5000 which would still be tax deductible, use your personal allowance and not attract employers National insurance. However, you will not be contributing to your state pension.Small Payrolls: (1-4 employees): Minimal impact due to the increased Employment Allowance
Larger Payrolls: You may need to factor in increased employment costs from 2025. This could be quite an impact on those who have more than 5 employees on the books. This is because the combination of increasing national insurance to 15% but also reducing the threshold for when you start paying this to £5000. You can expect this to erode your margins by anywhere between 2% to 4%
Corporation Tax and Business Rates
Some positive news here:
Corporation Tax rate is capped at 25%
Government’s commitment is to not raise corporation tax during this parliament
Tax Incentives for Small Businesses
The budget speech highlighted several opportunities for ecommerce platforms to manage their finances effectively:
R&D tax credits remaining accessible for digital infrastructure development
Tax deducted expenses for cloud computing and digital tools
Enhanced capital allowances for warehouse automation
Capital Gains tax Changes
If you’re thinking about selling your business or assets:
Basic rate Capital Gains tax (CGT) increasing from 10% to 18% from 2025
Higher rate rising from 20% to 24%
Business Asset Disposal Relief lifetime limit maintained at 10%, but rising to 18% by 2027. So it will now be more expensive to sell your business and take advantage of the business disposal relief or entrepreneurs relief which it was once called.
Action Points for Your Business
Review Your Staffing Plans
Calculate if your Employment Allowance covers your planned workforce, remember with the employment allowance you only have to pay national insurance on any amounts over £10,500.
Consider timing of any new hires around the 2025 National insurance contributions changes
It will now be more costly to hire a member of staff and national insurance will need to be factored in at 15%
Investment Planning
Take advantage of full expensing while it’s available
Consider bringing forward any major equipment purchases
Business Structure Review
If you’re growing beyond 4 employees, discuss with your accountant about optimizing your structure
Pricing is bound to increase across the board to cover these costs, so you should look to review your pricing if you are impacted by these changes (larger teams). If you are not directly impacted it may be worth keeping an eye out on other businesses’ prices.
Look at timing of any business asset sales around the CGT changes
Looking Ahead
Economic growth (the country’s GDP) is forecast at 1.1% in 2025, rising to 2% in 2026
Inflation is expected to average 2.5% this year
These figures suggest a stable environment for business planning
Meeting Industry Challenges
While the economy shows signs of stability, online retailers face significant challenges in 2025:
Adapting to changing consumer behaviour
Managing international trade complexities
Responding to potential tax rises in the digital economy
Investing in technological infrastructure
Navigating the new export hubs initiative requirements
Meeting compliance standards for medium enterprises in e-commerce
Need Help?
Remember, every ecommerce business is unique, so while these changes might seem straightforward, it’s worth having a chat with your accountant about how they specifically impact your business. They can help you plan for these changes and identify any opportunities they might present.
The key changes for the Budget 2024 for ecommerce relate to the national insurance, these can be quite complex if you are running a payroll so you will want to talk to your accountant after they have considered the new rules.
You can read the full 170 page budget here: but its probably easier to talk to your accountant!
We’ll keep you updated as more details emerge about these changes and their implementation. In the meantime, focus on growing your business and maintaining profitability through reviewing pricing.
