What the 2024 Budget means for the consumer sector

8 November 2024

The measures announced provided some good news and support for the consumer sector, however, it is important for all businesses to prepare for the additional costs that were included in the Budget.

The run up to the announcement was focussed on whether the Budget would include significant tax rises to help fund public services, reduce the UK’s debt and help the UK population with the cost-of-living crisis.

The Government acknowledged that shoplifting is a significant challenge being experienced by the consumer sector, which the Chancellor referred to as a ‘crisis’. Welcome funding has been committed to crack down on gangs which are targeting retailers, providing training to police officers and retailers, as well as scrapping the effective immunity from prosecution for low-value shoplifting. This measure seeks to deter criminals from stealing. If successful, this step could lead to reduced costs for the consumer and improved profitability for the consumer sector.

Relevant consumer sector Autumn Budget announcements

National Minimum Wage (NMW) & Employers National Insurance Contribution (NIC) increases

Many workers on the National Minimum Wage (NMW) can look forward to pay rises ranging from 6.7% to 18% starting April 2025.

The National Living Wage (NLW) will increase from £11.44 to £12.21 per hour for those aged 21 and over;
The NLW) will increase from £8.60 to £10 per hour for those aged 18 to 20; and
The apprentice and 16–17-year-old rate increases from £6.40 to £7.55.

Though this is good news for employees, employers will face significant challenges in the not-so-distant future.

Not only must employers fund these NMW increases, but the impact of the Budget on employers is compounded by the increase to Employer National Insurance Contributions. From 6 April 2025, the earnings limit at which employer NIC starts to be charged on employee pay will be reduced from £9,100 to £5,000, and the rate at which it is charged will rise by 1.2 percentage points from 13.8% to 15%. The additional annual cost of employing ten full-time workers on the NLW will be approximately £27,000 compared to current rates, factoring in a 3% employer pension contribution and the increased employer NIC.

With the consumer sector having a large workforce (especially within retail and hospitality), these rising business expenses may force some employers to make critical decisions, such as freezing recruitment, considering staff reductions or limiting pay rises for existing employees. Alternatively, consumer businesses may choose to pass on these staff cost hikes to the shopper - placing yet more expense in the hands of the individual consumer.

Businesses may wish to look at alternative methods of rewarding their employees, whilst keeping in line with NMW compliance, such as offering pension salary sacrifice arrangements, non-cash benefits, additional holidays for birthday or other recognition schemes.

Corporation tax reliefs

The uncapped ‘Full Expensing’ first year allowance, attracting a deduction of 100% for qualifying expenditure on plant and machinery, and the £1,000,000 Annual Investment Allowance (AIA) is being maintained under the new Labour Government. This positive measure for UK businesses encourages capital expenditure, with generous accelerated tax continuing to be available on qualifying investment expenditure – particularly relevant for consumer business when carrying out refurbishments and fit outs of shops, warehousing and office assets. This will provide profitable businesses with earlier tax savings by accelerating the tax relief available via the capital allowances scheme. Loss making companies will not see the cash benefits straight away, but generous capital allowances will increase the losses carried forward for offset against future taxable profits.

Furthermore, as part of Reeves’ commitment to incentivise investment, the Budget announced maintained rates for Research and Development relief – though this does not directly impact many consumer businesses, it is demonstrative of the Labour government’s attitude towards the importance of UK business investment and innovation.

Business rates relief

Small retailers and hospitality providers will be pleased by the announcements of the small business multiplier being frozen in 2025/26, as well as 40% relief for business rates on retail, hospitality and leisure properties, up to a £110,000 cash cap.

Small consumer businesses will feel the benefit of this announcement, helping them to reduce their cost base and keep more shops open.

High business rates will continue to put pressure on larger retail chains who do not see the benefit of these reliefs, given the low cash cap of £110,000. With several recognised brands closing stores over the last few years, large consumer businesses will continue paying close attention to their overheads and potential future investment plans. The UK Government announced that it intends to introduce permanently lower business rates in the future for retail, hospitality and leisure properties from 2026-27. This will be welcome news, although companies operating in the sector would have preferred earlier implementation.

Indirect Taxes

Whist the biggest headline on indirect taxes is the introduction of VAT on Private School fees from January 2025, supermarkets and pubs need to be aware of certain duty changes. Alcohol duty on draught drinks will reduce by 1.7% which Reeves illustrated as ‘a penny per pint’, with alcohol duty increasing on all non-draught alcoholic products in line with the Retail Price Index (RPI) from February 2025. The current temporary wine easement also ends on this date.

The Soft Drinks Industry Levy (SDIL) is also due to increase over the next five years, to reflect the 27% CPI inflation between 2018 and 2024. Annual increases will take place, starting 1 April 2025. The government is to consider the current sugar thresholds and the exemption that currently applies to milk-based drinks.

For the financial year 2026/27, Air Passenger Duty (APD) will increase, with domestic flights seeing an increase of £1 per passenger; short-haul, economy flights seeing an increase of about £2 per passenger; and an increase of £12 per passenger for long haul, economy flights. A 50% rise will apply to the use of ‘larger’ private jets.

Tax payments

Paying tax accurately and on time will become even more important for consumer businesses, with the Government announcing late paid interest increasing by 1.5% percentage points, to Bank of England base rate plus 4%. For companies who pay corporation tax under the quarterly instalments payment regime, estimating taxable profits accurately and keeping forecasts up to date will be essential, to minimise these extra costs.

Whist a number of the new policies announced in the Budget were focussed on individuals (including inheritance tax changes, abolition of the non-domicile status and Stamp Duty Land Tax increases), businesses within the consumer sector need to take stock of the other measures announced by our new Chancellor of the Exchequer and assess how future plans look in light of the remarks made by Reeves.