Impact of the 2024 Budget on the Life Sciences Sector

Yesterday, the Chancellor unveiled the 2024 budget, introducing several significant changes that will impact companies across the UK, particularly those in the life sciences sector.

National Insurance Contributions (NIC) – One of the most notable changes is the increase in employer NIC to 15% from the current 13.8%, effective from April 2025. Additionally, the threshold at which businesses start paying NICs on employees’ earnings will be lowered from £9,100 to £5,000. To support smaller businesses, the Employment Allowance will increase from £5,000 to £10,500 for employers whose Class 1 NI liabilities are less than £100,000. These changes are expected to contribute £25 billion to the exchequer by 2028/29 but present significant changes to a large proportion of Medilink’s members.

Capital Gains Tax (CGT) and Inheritance Tax (IHT) – The budget also outlines changes to CGT and IHT. The lower rate of CGT will rise from 10% to 18%, and the higher rate from 18% to 24%. CGT on the sale of residential property will also increase to 24%. The freeze on IHT thresholds has been extended until 2030, and from April 2027, inherited pensions will be included in the scope of IHT, significantly affecting tax planning for many families.

Impact on the Retail, Hospitality, and Leisure Sectors – The retail, hospitality, and leisure sectors will see a continuation of relief, albeit at a reduced rate of 40%, capped at £110,000. This, combined with increases in the National Living Wage and National Minimum Wage by 6.7% and 16.3% respectively, will result in higher operating costs for businesses in these sectors. Apprentice wages will also rise by 18% to £7.55 per hour.

Regional Focus: North of England – Greater Manchester will benefit from the integrated settlement from the Devolution Trailblazer starting April 2025, and the Transpennine route upgrades will proceed as previously committed. These developments are expected to enhance connectivity and economic growth in the region.

Investment and Economic Growth – On the investment front, the Chancellor’s growth agenda includes previously committed funding under the National Wealth Fund, with public sector net investment expected to average 2.6% of GDP over the term of this Parliament. However, with rising business taxation, driving up private investment may prove challenging. The Office for Budget Responsibility (OBR) has revised down medium-term growth forecasts, expecting the UK economy to grow by 1.1% this year, 2% in 2025, and then slow to 1.5% by 2028.

Challenges for Life Sciences Companies – The increase in employer NIC presents several potential challenges for life sciences companies, including increased operating costs, impact on small businesses, talent retention and recruitment issues, competitive disadvantage compared to international markets, reduced investment in innovation, and the need for operational adjustments.

In summary, while the budget aims to restore economic stability and increase investment, the life sciences sector must navigate these changes carefully to maintain growth and innovation. We encourage our members to review these updates and consider their implications for your businesses.