The Budget Impact
The October 2024 Budget announced significant changes to employer National Insurance:
- Rate increase from 13.8% to 15%
- Threshold reduction from £9,100 to £5,000
- Combined impact estimated at around £25 billion annually
- SME employers disproportionately affected
For SME clients, this means meaningful increases in employment costs. For accountants, it's an opportunity to deliver proactive, valuable tax planning advice.
Impact on SME Clients
Direct Cost Increase
For a typical SME with 20 employees earning average wages:
| Factor | Before Budget | After Budget | Change |
|---|---|---|---|
| NI Rate | 13.8% | 15% | +1.2pp |
| Threshold | £9,100 | £5,000 | -£4,100 |
| Estimated annual increase | - | - | £15,000-25,000 |
Illustrative—specific numbers vary by wage structure
Wider Implications
Beyond direct costs:
- Reduced capacity for pay increases
- Pressure on hiring decisions
- Potential price increase needs
- Cash flow timing effects
Clients need help understanding and responding.
The Budget changes affect almost every SME employer. This isn't niche tax planning—it's core business advice that every client with employees needs.
Planning Opportunities
Salary Sacrifice Arrangements
Salary sacrifice remains attractive:
Pension Contributions:
- Reduce employer NI by reducing gross pay
- Employee benefits from tax relief
- Popular and well-understood
Other Benefits:
- Cycle to work schemes
- Childcare vouchers (legacy)
- Electric vehicles
- Technology schemes
Considerations:
- National Minimum Wage constraints
- Employee willingness
- Administrative complexity
- Communication requirements
Business Structure Review
Some structures become more or less attractive:
Dividend vs Salary: With higher employer NI, dividend extraction (where appropriate) becomes relatively more attractive.
Company vs Self-Employment: Employment costs rise; contractor relationships may be reconsidered (with IR35 compliance).
Family Employment: Employment of family members for genuine work remains tax-efficient.
Capital Allowances
Full Expensing: Continued 100% first-year allowances for qualifying expenditure. Investment to improve productivity can offset employment cost increases.
R&D Relief: For qualifying activities, enhanced relief available. Often overlooked by SMEs.
Timing Considerations
Bonus Planning: Consider timing of bonuses around tax year boundaries and cash flow.
Recruitment Timing: If hiring planned, understand cost implications under new rates.
Investment Timing: Capital allowances and other reliefs have optimal timing.
The best tax planning isn't about aggressive schemes—it's about ensuring clients don't pay more than they need to through ignorance or poor timing.
Automated Scenario Modelling
The Traditional Approach
Manual tax planning involves:
- Gathering client information
- Building calculations
- Testing scenarios one by one
- Updating when things change
- Significant time per client
This limits how many clients receive proactive advice.
The Automated Approach
Modern tools enable:
- Quick scenario generation
- Multiple options compared simultaneously
- Real-time updates as data changes
- Consistent methodology
- Scalable across client base
Tools for Scenario Modelling
Spreadsheet-Based: Build templates for common scenarios:
- Input client parameters
- Automatic calculation of options
- Comparison output
- Documentation generated
Dedicated Software:
- Taxfiler scenario modelling
- Iris Tax Planning
- Professional package features
AI-Assisted:
- Generate scenarios from natural language
- Identify planning opportunities automatically
- Summarise options for clients
Implementing Proactive Planning
Identify Affected Clients
Prioritise:
- Larger employers (higher absolute impact)
- Labour-intensive businesses
- Clients already margin-pressured
- Those who haven't heard from you about this
Prepare Standard Scenarios
Create Templates For:
- Basic NI impact calculation
- Salary sacrifice comparison
- Dividend/salary mix optimisation
- Bonus timing scenarios
Benefits:
- Consistent methodology
- Faster delivery
- Quality assurance
- Scalable approach
Deliver Proactively
Don't Wait:
- Reach out to clients first
- Provide impact assessment
- Offer planning meeting
- Demonstrate value
Meeting Structure:
- Show their specific impact
- Present available options
- Discuss preferences and constraints
- Recommend approach
- Agree next steps
Follow Through
Implementation:
- Support with any changes
- Document decisions
- Update systems
- Plan ongoing review
Documentation:
- Letter confirming advice
- Calculation workings
- Client decisions recorded
- Compliance with professional standards
Value Demonstration
For Clients
Show clearly:
- What they would have paid without advice
- What they'll pay with your recommended approach
- The saving achieved
- Your role in delivering it
For Your Practice
Proactive tax planning:
- Demonstrates value beyond compliance
- Justifies advisory fees
- Builds client loyalty
- Differentiates from competitors
Pricing Advisory Work
Options:
- Fixed fee for planning review
- Percentage of savings achieved
- Included in enhanced service tier
- Separate engagement for implementation
Key Principle: Value-based pricing reflects benefit to client, not just time spent.
Automation Enables Scale
The Economics
Manual Approach:
- 4 hours per client for full planning review
- At 100 clients affected = 400 hours
- Impossible to do for everyone
- Advisory becomes premium service
Automated Approach:
- 30 minutes per client with tools
- 100 clients = 50 hours
- Proactive service for all
- Advisory becomes standard
Building the Capability
- Develop templates for common scenarios
- Integrate with client data where possible
- Train team on tools and approach
- Create workflow for delivery
- Measure and improve based on results
The Competitive Advantage
When clients face increased costs:
Some Accountants:
- Wait for clients to ask
- Process the compliance
- Miss planning opportunities
- Appear reactive
Proactive Accountants:
- Reach out first
- Provide analysis and options
- Deliver genuine savings
- Build advisory relationships
Which would clients prefer? Which will retain clients and earn referrals?
If you don't proactively advise your clients on Budget implications, someone else might—whether that's a competitor, a financial adviser, or the business next door sharing their experience.
Getting Started
This Week
- Identify clients most affected
- Calculate basic impact for top 10
- Draft outreach communication
- Schedule planning conversations
This Month
- Build scenario modelling templates
- Train team on approach
- Roll out to broader client base
- Track engagement and results
Ongoing
- Refine tools based on experience
- Document common questions and answers
- Build into standard annual service
- Plan for future Budget changes
The Budget changes are significant. Your response to them demonstrates your value as an advisor.
Want to deliver proactive tax planning at scale? We help accounting practices implement automation that makes advisory services efficient and consistent.
Book a consultation to discuss your advisory service development.
