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Yesterday, the Chancellor announced his spring budget 2024.
As usual there is a lot to digest - so we’ll be looking at it through the lens of the small business owner, and distilling the key points as we see them.
With a general election looming later in 2024, the government are trying and put more money into the pockets of working people. However, not much of this money will make its way to small business owners.
Sit tight, here goes…
Employee National Insurance Contributions are reducing - again
National Insurance Contributions are again being cut. The main rate of Employee National Insurance is reducing by 2p in the pound, so from 10% to 8%, starting from 6th April 2024.
Combined with the 2p cut announced in the Autumn Statement 2023, a worker on a salary of £25,000 will save nearly £500 a year / £41 per month.
There are no changes to the amount of NI paid by the employer, it just means employees’ net pay on each payslip will increase slightly.
Self-employed National Insurance Contributions are also reducing - again
The government is also cutting a further 2p from the main rate of self-employed National Insurance starting 6th April 2024, on top of the 1p cut announced at Autumn Statement 2023.
This means that the main rate of Class 4 NICs for the self-employed will reduce 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.
Changes to the Child Benefit Charge
Currently, a household with 2 parents, each earning £50,000 a year (total £100,000), still get to keep 100% of their Child Benefit payments.
But those with one parent earning over £50,000 will have some of the benefit withdrawn via their personal tax return / bill on a sliding scale, with all of it being withdrawn when income tops £60,000.
From 6th April 2024 the point at which child benefit will start to be withdrawn will increase to £60,000, and the top end of the scale where it will be taken away entirely will increase to £80,000 a year.
More importantly, the government is consulting on moving from being based on an individual’s salary to a system based on household income. This is expected to change in April 2026.
Again, more details when we have them!
The threshold for registering for VAT is going up to £90k
The point where businesses need to register for VAT is going up from £85,000 to £90,000.
This only affects businesses that aren’t registered for VAT already.
Wonder if this will affect the remarkable distribution of reported turnover of UK businesses, which seems to do strange things just below and just above the current £85k threshold:
Credit: https://www.icaew.com/insights/viewpoints-on-the-news/2023/may-2023/chart-of-the-week-vat-threshold
Inflation has fallen and the economy is picking up
Inflation has more than halved to 4.0%, from its recent peak at 11.1%.
Good news for all small businesses that have felt the relentless pressure on their cost base over the last two years.
The OBR forecasts inflation will 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 Recovery Loan Scheme is being renamed the “Growth Guarantee Fund”
The Government has 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:
you need to have annual turnover of £45 million or less
you must be “viable”
you must not be experiencing any financial difficulties
As usual, details are thin on the ground at the mo. Will share more info when we have it.
UK ISA
There is a new ISA coming soon! The “UK ISA” gives savers another £5k tax-free allowance, on top of the current £20k that can be paid into an ISA each tax year.
The only restriction is this new UK ISA needs to be invested in British businesses.
Expect a range of providers to enter this space in due course.
Capital Gains Tax on the sale of 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% from April 2024.
This will benefit any property owner who is selling a property which is not their home, such as buy-to-let houses.
Remember there is no Capital Gains Tax to pay if you sell a property that is your ‘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 2024 to 1st February 2025.
Smokers and vapers pay more from October 2026
In Oct 2026 the government is introducing a new duty on vapes. The tax on cigarettes and tobacco products will also go up.
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 equipment, machinery, and certain business vehicles from their profits, small businesses can benefit from tax relief.
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 property tax system
The government is abolishing the Furnished Holiday Lettings tax regime from 6th April 2025 and the multiple dwelling stamp duty relief from 1st June 2024.
Changes to the non-dom tax regime
The tax breaks for non-dom residents, people who live in the UK, but 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.
The government is beefing up it’s 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.
Right, that’s your lot!
See you again next time, for the Autumn Statement 2024 👋