Changes for Business in April 2025 - Will the KBO approach be Enough?Posted: Jan 4, 2025

In October last year, a budget was delivered that will have repercussions for business throughout the coming year.

The questions facing directors and business owners in the UK are how much will it affect them, what do they need to do to deal with these changes and is now the time to start worrying about what will happen to your business?

A reminder of where to focus when it comes to the budget

If you scroll through LinkedIn at the moment, it probably won’t take long to find some extended series of posts about how the budget last year was ‘anti-business’ or perhaps a long tirade featuring someone’s opinion of the new policies introduced. I occasionally, when I get a moment, flick through and read a few of them. It seems to me that a lot is being talked about but not many solutions are being offered. So, here is what I think about the coming changes in April 2025. There is only one word that business owners and directors should be concentrating on, and that word is ‘coming’. These changes are coming, it doesn’t matter what the rights and wrongs are because come April 1 this year they will affect you. When something is inevitable, all the rhetoric, LinkedIn polls and discussions won’t make one iota of difference… but a practical response just might.

So my advice is this: For the sake of your financial stability and the future of your business, focus on a practical response to the changes in April 2025.

Clear changes at least mean you can plan!

Let’s face it, we have had some pretty unsettled years recently and it has had a real impact on the number of insolvencies we are seeing. Things are, as we seem to have been saying for a while now, tough out there. The bottom line is that they are going to continue to be tough for the next year. However, there is still some hope amongst all this, albeit justified, concern about the financial future of business in the UK. At least we know what is happening in April, as opposed to the whirlpool of events such as pandemics, wars, inflation and fuel costs, that we have lived through in the past few years.

This time we can see the changes approaching and that means we can adjust our approach.

The financial highlights (or perhaps lowlights would be a better term) of the coming year for most business owners will be:

• Employer National Insurance Contributions (NICs): The rate will rise from 13.8% to 15%. The secondary threshold for employer NICs will decrease from £9,100 to £5,000
• National Living Wage (NLW): The NLW for employees aged 21 and above will sit at £12.21 per hour
• Capital Gain Tax (CGT): The basic rate will rise from 10% to 18%, and the higher rate from 20% to 24%
• Business Asset Disposal Relief (BADR): The current 10% rate will increase to 14% from April 2025 and to 18% by April 2026

These will be the big ones for most businesses. There are also some specific changes coming such as the abolition of the furnished holiday lettings (FHL) Regime which will mean many rental businesses will now be treated as investment income, potentially increasing tax liabilities for property owners.

As I said, it’s not going to be easy. According to The Centre for Policy Studies, for instance, employing a worker earning the National Living Wage will cost businesses approximately £2,000 more annually. There is no getting away from the fact that that means higher costs for your workforce.

A few practical steps you can take to deal with the April changes

We have a couple of other articles on our blog page that you may also find useful around this subject but here are a few ways to effectively navigate these impending changes:

Before anything else do an in-depth financial assessment!

You know the changes; you know what they will mean to you. Subject to any unexpected events, you should be able to rely on your results. Just make sure to be clear and honest with your assessment.

Budgeting is going to be your priority, so clearly, step one is going to be to account for your financial projections surrounding increased NICs and wage expenses.

• Cash Flow Management: Higher payroll obligations mean you will need more liquidity. Or, to put it another way, where is that money coming from? Is it through increased sales, higher prices, or expansion?

I am sure you have seen a lot of chatter about how businesses are no longer expecting to expand or develop new markets and similar. Well, if that financial reticence is a direct result of costs, then it’s sensible. If it’s a knee-jerk reaction, then it’s no substitute for planning. Expansion and growth may not automatically be off the table if you take a hard look at the numbers, they may just look a little different to your expectations pre-budget.

Operational Efficiency will be key

• Cost Control: Can you identify areas to reduce expenses without compromising quality?
• Process Optimisation: Could you implement efficient working practices to enhance productivity?
  Workforce Planning is going to be inevitable regardless of the changes.
• Staffing Levels: It goes without saying that you will need to evaluate staffing needs considering increased employment costs.
  Training and Development: Would now perhaps be the time to invest in employee skills to improve efficiency and adaptability?

Tax planning is another certainty you can forecast

• Keep to Your Payment Timing: We have said it before and we will probably need to say it again, HMRC are not kidding around when it comes to tax right now. They may be quieter than some creditors, but they are going to want paying and they will come after the money.

Seek advice if you need it because it could be too late to change things later.

• Consult Financial Advisors: Engage with tax professionals to develop strategies tailored to your business.
• Legal Compliance: Ensure all your business practices align with the new regulations. The last thing you need are penalties and fines throwing financial spanners in the works.
   

Most importantly, KBO is unlikely to work this time.

Winston Churchill famously championed the acronym KBO. As you probably know it meant ‘Keep Buggering On’ and was a response to the chaos of the times. The only reaction that worked was to just keep going. During the chaos of furloughs, fuel costs, rising cost of living, Brexit, and the pandemic over the last few years, KBO may well have felt like the only attitude available. Through 2025 and specifically the coming changes in April, KBO will almost certainly be the wrong attitude though. These changes are certain to roll out and you need to roll with them, or they may just steamroll over you.

Plan, prepare, and be ready, and hopefully, you will find that you can not only survive, but who knows, with careful planning, informed decisions, and a little flexibility, you may even thrive.

However, if it looks like it isn’t going to be possible to carry on, or you think you may be facing financial hardship in your business, contact us as soon as you can. It isn’t going to go away, so ignore the temptation to KBO. Taking the first step and contacting us now is a much better scenario than a desperate phone call further down the line when the ‘buggering on’ options run out.

Back