2024 Changes and Challenges for SMEs

As we turn the page to 2024, the coming year promises to bring a wave of new opportunities, but also a myriad of challenges that could reshape the landscape for SMEs. From emerging technological trends and policy shifts to ongoing economic recovery, the future is full of variables. In this blog, we will explore some of the changes and challenges to be expected in 2024.

Tax changes

From 6th January 2024, the main rate of National Insurance Contributions (NICs) paid by employees will be reduced from 12% to 10%.
From 6th April 2024, the main rate of NICs paid by those who are self-employed will be reduced from 9% to 8%.
The Basis Period Reforms will be introduced, representing a significant change for self-employed individuals and partnerships. Instead of using an accounting period end, these entities will now be taxed on the profits made during the tax year.
From 1st April 2024, both the National Living Wage (NLW) and the National Minimum Wage (NMW) will increase. The NLW rate will increase to £11.44 per hour, and the NMW will increase to £8.60 for 18-20 year olds, £6.40 for 16-18 year olds and apprentices, and £9.99 when accommodation is being provided by the employer.

Policy developments

2024 was supposed to be the year we saw Making Tax Digital (MTD) expand to include Income Tax Self Assessment (ITSA) for self-employed individuals and landlords. Although it’s been delayed until 2026, we may see some progress on the next iteration of MTD this year.

R&D tax relief

For accounting periods beginning on or after the 1st April 2024, a simplified system that merges the R&D Expenditure Credit (RDEC) and SME schemes will be introduced.

Technological advancements

The 2024 Technology Insights Report by TechUK underscores a significant rise in SMEs embracing cutting-edge technologies. It reveals that around 70% of SMEs intend to leverage cloud-based solutions, and over 60% are incorporating AI-powered automation into their processes. Additionally, the British Business Bank data indicates a marked increase in SMEs turning to fintech services, with digital platform loan applications seeing a 25% surge.

Economic outlook

According to various sources, the UK economy is expected to grow slowly in 2024, with a rise between 0.1% and 0.7%. High inflation is likely to continue. This could lead to a situation called ‘stagflation’, where prices rise but economic growth is slow. However, there’s also some good news. Experts predict that inflation might start to decrease, and the cost-of-living crisis could end, offering some relief for businesses. However, these are just predictions and things could change, so businesses should be ready to adapt.

Skills shortage

In 2024, it’s predicted that UK SMEs will face significant recruitment challenges due to ongoing skills shortages. According to Richmond Chambers, the UK’s Shortage Occupation List for 2024 shows a number of occupations where there’s a lack of skilled labour.

A focus on ESG and DEI

In 2024, UK SMEs are expected to focus more on ESG (Environmental, Social, Governance) and DEI (Diversity, Equity, Inclusion). They’ll work towards being eco-friendly and reporting on their sustainability efforts. Also, they will place a stronger emphasis on creating diverse, fair, and inclusive workplaces.

Embracing the future

In 2024, small businesses can expect some big changes. It might be a bit challenging, but it’s also a chance to grow and get even better. By keeping up with the latest info and being ready to adapt, you can use these changes to boost your business, work smarter, and keep your customers happy in a changing market.

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This content may have been developed with the assistance of AI tools. Content is reviewed by a member of the Bright team before publication. Guidance on legislation can be obtained from your industry body.