Yesterday, the Chancellor announced his Spring Budget.
There is a lot to digest and unpick. With a general election looming, it was clear that the Chancellor had decided to put more money back into the pockets of working people. However, not much of this money directly comes to small business owners.
Let’s start with the good news:
National Insurance Contributions are going down.
National Insurance Contributions are again being cut. The government is cutting the main rate of employee National Insurance by 2p from 10% to 8% from 6 April 2024. Combined with the 2p cut announced at Autumn Statement 2023, this will save the average worker on £35,400 over £900 a year.
The government is also cutting a further 2p from the main rate of self-employed National Insurance on top of the 1p cut announced at Autumn Statement 2023. This means that from 6 April 2024 the main rate of Class 4 NICs for the self-employed will now be reduced from 9% to 6%. Combined with the abolition of the requirement to pay Class 2, this will save an average self-employed person on £28,000, around £650 a year.
The threshold for registering for VAT is going up
The point where businesses need to register for VAT is going up from £85,000 to £90,000 from April 2024. This will supposedly help small businesses grow. There are differing opinions about this. What we see is that, in reality, businesses often slow their growth as they near the VAT threshold. Radically lowering the VAT threshold towards £40,000 or even lower would make it a level playing field for most small businesses. But then, what does the Chancellor really know about small businesses?
Inflation has rapidly fallen and the economy is picking up
Inflation has more than halved from its recent peak, i.e. from 11.1% to 4.0%. The OBR forecasts inflation to fall to its 2% target in Q2 2024, a year earlier than in their November 2023 forecast. In 2023, the UK was pretty much in recession as GDP grew by 0.1%. Growth is now forecast to pick up from the first half of 2024 and the IMF is forecasting that the UK will have the third fastest cumulative growth in the G7 over the 2024-2028 period.
The post-pandemic recovery loan scheme is being extended and renamed the Growth Guarantee Fund
The UK government has recently announced an extension of the Recovery Loan Scheme, which will provide £200 million in funding to assist small businesses to invest and expand. To qualify for the loan, businesses must have a turnover of £45 million or less, must be viable, and should not be experiencing any financial difficulties.
Full expensing for leased assets is coming…
Capital allowances are a great way for businesses to reduce their tax bill. By deducting the value of certain items such as equipment, machinery, and certain business vehicles from their profits, businesses can benefit from tax relief. It’s a smart way to save money and reinvest it back into the business. Full expensing is an allowance which allows companies to use these capital allowances in the year that the investment was made. The chancellor indicated yesterday that at some point in the near future full expensing for leased assets is coming. When? Apparently ‘when affordable to do so’.
Changes to the Child Benefit Charge.
At the moment, there is a situation where a household with 2 parents, each earning £49,000 a year, still gets the full Child Benefit, but those with one parent earning over £50,000 will see some or all of the benefit withdrawn. From 6 April 2024 the point at which child benefit will start to be withdrawn will now be at a higher level of earnings i.e. £60,000 not £50,000. Instead of starting to lose child benefit once at least one parent earns over £50,000 a year, it will be £60,000. It will be taken away entirely from £80,000 a year, rather than £60,000. But more importantly, the government is consulting on moving the system from being based on an individual’s salary to a system based on household income. This new system will come in by April 2026. So watch this space!
Capital Gains Tax on residential properties is being reduced.
The government is keen to increase the amount of available housing. It is reducing the higher rate of property capital gains tax from 28% to 24% in April 2024. This will benefit any property owner who is selling a property which is not their main home.
Fuel duty remains the same
The ‘temporary’ 5p cut in fuel duty is being extended for another 12 months.
Alcohol duty remains the same
The alcohol duty freeze is being extended from 1st August to 1st February.
UK ISA
There is a new ISA in town! This ISA gives savers another £5k tax-free allowance, on top of the current £20k that can be subscribed into an ISA. The only restriction is this new UK ISA needs to be invested in British businesses.
A boost for the creative industries
The government is also announcing over £1 billion of new tax reliefs for the UK’s creative industries. This includes introducing a 40% relief from business rates for eligible film studios in England for the next 10 years; introducing a new UK Independent Film Tax Credit; and increasing the rate of tax credit by 5% and removing the 80% cap for visual effects costs in the Audio-Visual Expenditure Credit. A permanent extension will be made to tax relief for theatres, orchestras, museums and galleries.
The losers:
Changes to the property tax system
The government is abolishing the Furnished Holiday Lettings tax regime from 6 April 2025 and the multiple dwelling stamp duty relief from 1st June 2024. Contracts that were exchanged on or before the 6 March 2024 – i.e. before the budget was announced – will continue to get the multiple dwelling stamp duty relief regardless of the completion date. Any purchase that completes before 1 June 2024 will also get this relief.
Changes to the non-dom tax regime
The tax breaks for non-domiciled residents, people who live in the UK, but who are not domiciled here for tax purposes have been abolished. Currently, foreign nationals who live here, but are taxed in another country, do not have to pay tax on their foreign income for up to 15 years. From April 2025 this is changing.
For new arrivals, who have a period of 10 years consecutive non-residence, there will be full tax relief for a 4-year period of subsequent UK tax residence on foreign income and gains arising during this 4-year period, during which time this money can be brought to the UK without an additional tax charge.
Existing tax residents, who have been tax resident for fewer than 4 tax years and are eligible for the scheme, will also benefit from the relief until the end of their 4th year of tax residence.
There are transitional arrangements being put in place for existing non-doms.
Smokers and vapers
In Oct 2026 vapers will be taxed more and the tax on cigarettes and tobacco products will go up.
The government is beefing up its HMRC team to get more tax in
Sadly, the government is not – on the surface of it – making an investment in front-line HMRC staff. It is investing an extra £140m to improve HMRC’s ability to manage tax debts. Think of this as an investment in identifying where more tax is due and then having the headcount to get this money paid.
In addition, it was announced that there is a consultation on how best to implement the Crypto-Asset Reporting Framework and amendments to the Common Reporting Standard.
If you would like to discuss any of these in further detail, or would like to understand how these might impact you personally, please do get in touch.