Business News

Spring Budget 2024

David Crossley

Today, the Chancellor Jeremy Hunt shared his fiscal plan for the next tax year. Here is a summary of the new measures relevant to businesses.

  • The chancellor promised more investment and more jobs and stated that the OBR forecast showed inflation was expected to fall below 2 per cent by the end of 2024.
  • Following the reductions announced in the Autumn Statement and actioned in January 2024, employee national Insurance will be further cut from 10% to 8%, estimated to be worth around £450 to employees, and Self Employed National Insurance will reduce from 8% to 6%, equivalent to a £650 tax cut for all self-employed.
  • He confirmed that fuel duty and alcohol duty would again be frozen for another twelve months, and the temporary 5p cut on fuel duty (which was due to end at the end of this month) will also be extended.
  • Hunt said they will widen the tax relief on capital costs by including leased assets in the permanent full expensing regime, allowing companies to write off the cost of the investment in assets, in one go.
  • The Recovery Loans scheme will be extended under the Growth Guarantee Scheme, with £200m of funding to support SMEs to access financing.
  • A billion pounds of additional tax relief will be made available for the creative industries including British films, Visual Effects and production, over the next five years.
  • A guarantee on the rates that will be paid to childcare providers to deliver the government's "landmark offer" for children over nine months old for the next two years.
  • The VAT registration threshold of £85,000 will increase to £90,000, and the deregistration threshold will increase from £83,000 to £88,000 from 1st April 2024.
  • The child benefit threshold will raise from £50,000 to £60,000, with the top taper of £80,000, saving most an estimated £1,300 from April 2024. Further plans were announced to make it fairer and base it on household income from two parents, rather than cases where one parent earns in excess of £50,000, and the other earns nothing or very little, compared to two parents earning £49,000 each.

Some less relevant to businesses:

  • New British ISA in UK assets and equity up to £5,000, on top of existing ISAs.
  • The government will fund the NHS's multi-billion "productivity plan" in full. The chancellor says the systems that support doctors and nurses are often antiquated, with staff spending hours every day filling out forms. The investment needed to modernise NHS IT systems will cost £3.4bn - but will unlock £35bn of savings.
  • Additional tax levy on vaping products from October 2026, alongside a one-off increase in tobacco duty
  • Property taxation – Furnished holiday lettings regime will be abolished. The chancellor says he will scrap tax breaks which make it more profitable for second home owners to let out their properties to holiday makers rather than to long-term tenants to rent.
  • Multiple dwellings relief (relief for people buying more than one dwelling) is being abolished as it is being regularly abused.
  • The government is increasing the Air Passenger Duty (APD) for business class travellers.
  • The higher rate of Capital gains tax of 28% reduced to 24%  
  • Extending the sunset on the additional profits levy from gas and electric providers and extend the UK’s windfall tax on the profits of oil and gas companies until 2029.

What impact will the budget have on SME businesses?

There are some positive announcements for SME businesses, such as the National Insurance cuts from 10% to 8% for employees and 8% to 6% for the self-employed, the VAT threshold increasing by £5,000 and the fuel duty freeze being extended. Most will feel it did not go far enough to help small businesses and encourage growth from said businesses, on the back of a budget promoting growth and encouraging working.

These latest announcements will go alongside those already planned including those mentioned in previous budgets and the Autumn Statement last year. This includes the dividend allowance reducing from £1,000 to £500, which will see the amount of tax-free dividends a shareholder can receive halved again. It will also see the amount of tax-free gains an individual can make on the disposal of their assets, reduce from £6,000 to £3,000 from the 6th April 2024, following the reduction the previous year from £12,300.

Is the VAT Threshold increase a positive change for small businesses?

An increase in the VAT registration threshold will be welcomed by some smaller businesses, though for most small businesses it will have no impact, with the government estimating only 28,000 businesses will be taken out of VAT Registration altogether. It will be a relief for a small percentage of businesses operating close the current threshold of £85,000, offering some scope to increase their fees, grow their business further or delay the administrative burden of registering for VAT. The deregistration limit will also be increasing to £88,000, meaning that you will be able to de-register sooner, should your business turnover reduce.

In summary

Though there are some positives above for small businesses and sole traders, many will feel this budget did not go far enough to ‘encourage growth’. Besides the duties frozen and Child Benefit changes, there were very few incentives for directors of Limited Companies, which could have included increases to the tax-free threshold of £12,570, the higher rate tax threshold of £50,270, (both frozen since 2021) or even the dividend allowance, set to reduce to £500 from 5th April 2024.

The much speculated, though widely reported underfunded reductions to income tax rates, also failed to materialise, along with any changes to the planned reduction to the Capital Gains allowance, from £6,000 to £3,000 from 5th April 2024. Whilst we currently remain in a recession, the Office for Budget Responsibility (OBR) forecast growth in May 2024, along with expected reductions to both interest rates and inflation, shortly after.

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