How Will The 2024 UK Budget Impact Your Bubble Tea Store?
As you are all probably aware, the 2024 UK budget was released to the public on the 30th October 2024. With various changes to government policies, there are a few key updates that are important to bubble tea shops to be aware of and plan for to ensure sustainable business operations are maintained. To learn more about the key takeaways for you, as a bubble tea shop owner.
Staff Costs Rising Due to Minimum Wage Increase
From 6th April 2025, the minimum wage for workers aged 21 and over will rise to £12.21 per hour (from the current £11.44). While those who are aged 18-20 years old will rise to £10.00 per hour (from £8.60). This change reflects a significant increase aimed at supporting workers amid inflation but places pressure on small businesses to absorb higher payroll expenses. It’s also worth mentioning that while not confirmed yet, it is anticipated that the UK government plan to make minimum wage for 18-20 and 21 and over the same in the next 5 or so years, meaning wages will be increased again for those with younger employees. Bubble tea shops will need to reassess their staffing budgets, potentially adjust pricing, and explore more efficient labour management strategies.
National Insurance Increases for Employers
Employer contributions to National Insurance are expected to rise, adding to the financial burden of staffing costs. Currently, employers pay national insurance contributions (NICs) on staffs’ earnings at a rate of 13.8%. However, from 6th April 2025, this rate will be increased to 15% and the Secondary Threshold to paying NICs will be decreasing from £9,100 to £5,000 per year. In this measure, employment allowance will also be increasing from £5,000 to £10,500. Bubble tea shops with multiple employees must plan for these elevated expenses in their financial forecasts. Ensuring that payroll budgets align with these new obligations is essential for financial health.
Hospitality Rates Relief (Reduction)
Since November 2023, hospitality businesses have benefitted from a 75% reduction in their business rates, capped at £110,000 per business. This relief, however, was always temporary. The 75% reduction was set to last until 31st March, 2025. In the budget update, it was announced that this relief would drop down to 40% for the 2025/2026 tax year. This reduction is not ideal for bubble tea stores as this adds to the list of growing expenses but is an important point to build into your financial plans.
Capital Gains Tax (CGT) & Business Asset Disposal Relief (BADR) Increase
Effective from 30th October 2024 we have seen an increase in capital gains tax, from 18% (up from 10%) at the lower rate, and 24% (up from 20%) at the higher rate. These increases may impact business who might be looking to sell assets within their business, such as moving retail store locations, selling store fixtures such as refrigeration, and general bubble tea store equipment. Higher CGT will affect long-term strategies involving business sales or expansions. Meanwhile, Business Asset Disposal Relief (BADR) will be increasing from 10% to 14% from 6th April 2025, further increasing to 18% from 6th April 2026. Shop owners should seek advice on structuring these transactions efficiently to mitigate tax exposure.
Stamp Duty Updates
From 6th April 2025, there will be some changes in the rates for stamp duty tax. Stamp duty is the tax that is paid on any property sold within the UK and is applicable to all property types, including – residential, mixed, and commercial properties. To see the breakdown of these changes visit the govt.uk website, and click here to see an example of what this might look like for your business. Changes to stamp duty may affect property acquisitions for business expansion or relocation. Any rise in stamp duty adds to the cost of securing new retail spaces. Owners considering expansion should incorporate this into their capital planning.
Key takeaways for your bubble tea business?
- Wage and NIC budgets: Adjust staffing budgets and optimise operations to handle increased wages and national insurance. Implement slight menu price adjustments if necessary.
- Financial Planning: Update financial forecasts to include higher payroll and tax obligations. Audit expenses to identify cost-saving opportunities.
- Expansion Strategy: Rethink asset sales and property expansion plans in light of increased capital gains tax and new stamp duty rates.
- Reduced Business Rates Relief: Prepare for reduced relief from 2025/2026 and explore local support programs.
- Customer Marketing: Strengthen loyalty programs and run targeted campaigns to support pricing changes.
Proactive planning, potentially with the assistance of financial advisors, can help your bubble tea shop navigate these changes while still maintaining profitability and growth.
References:
https://www.gov.uk/government/publications/autumn-budget-2024
https://www.gov.uk/national-minimum-wage-rates
https://www.tax.org.uk/national-insurance-explainer-oct24
https://www.gov.uk/apply-for-business-rate-relief/retail-discount
https://www.girlings.com/latest/upcoming-changes-to-stamp-duty-in-place-from-31-march-2025