What Does the Autumn Budget Mean for the Beauty Industry?

Late October, the Chancellor introduced the government’s first Autumn Budget, which has some significant implications for the beauty industry. Here’s a breakdown of the key changes and what they could mean for beauty businesses across the UK.

1. Boost to Employment Allowance The budget doubles the Employment Allowance from £5,000 to £10,500 starting next April. This move is designed to encourage hiring and support apprenticeships, which are crucial for developing new talent in the beauty industry. The British Beauty Council has welcomed this change, as it should provide a much-needed incentive for beauty businesses to hire and train emerging professionals.

2. Increase in Employer National Insurance Contributions Employer National Insurance contributions are set to increase from 13.8% to 15%, and the threshold at which businesses must contribute will decrease to £5,000 per employee. For beauty businesses—many of which are small and operate with limited staff—this shift may increase costs. The British Beauty Council notes that while the goal is to boost revenue, the change could prevent wage increases, discourage hiring, and stifle growth, especially for smaller beauty businesses.

3. Rise in Minimum Wage The minimum wage will rise by 6.7%, with the new rate for over-21s at £12.21 starting April 2025. Apprentices are set to receive an even larger increase, from £6.40 to £7.55 per hour. While this is great news for workers, it might add financial pressure on beauty salons and spas, potentially impacting the number of apprenticeships offered in an industry that already faces recruitment challenges.

4. Reduction in Business Rate Relief Starting next April, business rate relief for the beauty and personal care sector will drop from 75% to 40%, with support capped at £110,000 per business. Although the small business multiplier will be frozen at 49.9p for the following tax year, this cut in relief could increase overhead costs for beauty salons, spas, and clinics, impacting their ability to reinvest in growth.

5. Corporation Tax and Capital Gains Tax Increases Corporation Tax will remain capped at 25%, which is the lowest in the G7. However, changes to Capital Gains Tax and Business Asset Disposal Relief rates may impact beauty entrepreneurs looking to sell or grow their businesses. The British Beauty Council is concerned that the increases could discourage business owners from taking on entrepreneurial risk, which could slow industry innovation and growth.

6. Funding for Small Business Loans and Fraud Prevention The government will invest £250 million in the British Business Bank’s small business loans program and expand the HMRC’s counter-fraud team. These initiatives aim to support SMEs by making financing easier and helping businesses manage debt. Beauty businesses may find this beneficial, especially those looking to expand or invest in new equipment or locations.

7. Continued Freeze on Fuel Duty The current freeze on fuel duty has been extended for one more year, which could help offset some transportation and delivery costs. For beauty businesses that rely on shipping products, this freeze might offer some temporary relief.

Looking Forward: Key Issues for 2025 and Beyond

  The British Beauty Council has highlighted several key areas that it will continue to advocate for, including:

- VAT Retail Export Scheme: The beauty industry has called for a tax-free shopping scheme for overseas visitors, but it wasn’t addressed in this budget.
- Support for Onshoring: More targeted incentives to bring manufacturing back to the UK would benefit local beauty brands and manufacturers.
- Training as a Tax Deduction: Many in the industry want training costs to be tax-deductible, especially for expanding into new areas. Current HMRC rules limit tax relief on training expenses, which can discourage upskilling.
- Green Incentives: To support eco-friendly investments, the industry has proposed a 150% VAT rebate on green purchases, which would make sustainable practices more accessible to small businesses.

The Verdict: Balancing Growth and Sustainability The beauty industry’s response to the budget has been mixed. While there are some positives, such as the increase in Employment Allowance, other measures like the hike in National Insurance contributions and reduced business rate relief may create financial challenges for small beauty businesses. Many in the industry are concerned that these measures could lead to fewer hiring opportunities, less support for apprenticeships, and greater pressure on independent operators.

In summary, the Autumn Budget presents both opportunities and challenges for the beauty sector. As always, staying informed and adapting to these changes will be essential for beauty business owners looking to thrive in the coming years.

Source: www.https://britishbeautycouncil.com/what-does-the-budget-mean-for-beauty/