On 6th March, Chancellor Jeremy Hunt delivered the government’s outline of fiscal policies, tax changes, and spending priorities in the annual Spring Budget.
Recent low-growth led to The Chancellor having less-than-expected headroom to make any radical changes, and as such, opted for more modest cuts to National Insurance Contributions rather than cutting the base rate of income tax.
During his speech, Jeremy Hunt also compared the UK’s investment prospects to that of Silicon Valley in California and seeks to encourage budding entrepreneurs in the tech industry to invest in British business.
In this article, we’ll begin by looking at the implications for small businesses, freelancers and other self-employed workers.
National insurance:
National insurance to be cut by a further 2p in April – from 10% to 8%
With the further 2% reduction in NI, if you are an employer, be aware that your payroll should automatically update to reflect the cut comes that into effect on 6th April.
For the self-employed, from 6th April, Class 4 National Insurance contributions will be cut to 6% on profits between £12,570 and £50,270.
National Insurance contributions should save the average self-employed worker £650 when combined with the cuts that were already announced in the 2023 Autumn Statement.
VAT:
VAT registration threshold for businesses increasing from £85,000 to £90,000 from April
For small businesses, the government wants to reduce the administrative and financial burden of VAT on small businesses. As such, the government will increase the VAT registration threshold – the amount of money your business can earn before registering for VAT.
The current threshold is at £85,000, but under new plans, this will rise to £90,000 in April. The chancellor claims that it will take around 28,000 small businesses out of paying VAT altogether.
Full Expensing for Leased Assets:
Another important announcement in the 2024 Spring Budget for businesses was around capital allowances – a form of tax relief that lets businesses deduct the value of certain items from their profits – resulting in a lower tax bill. These allowances may be claimed on machinery, equipment, and certain business vehicles.
Full expensing, a first-year capital allowance, lets businesses deduct 100% of the total cost of qualifying investments from taxable profits in the year in which the expenses were incurred.
The list is not definitive of what qualifies for full expensing, but examples of investments that may qualify include computers, office equipment, construction equipment, vans, and lorries but not cars.
Full expensing was made permanent in the 2023 Autumn Statement. In the Spring Budget yesterday, full expensing will apply to leased assets “when affordable to do so.” Currently, full expensing only applies to assets purchased by the qualifying business.
According to the government, this will amount to a £10 billion tax cut every year for businesses investing in the UK.”
Growth:
The economy is expected to grow by 0.8% this year and 1.9% next year and the UK has “turned the corner on inflation.”
The positive growth forecast suggests economic expansion, aided by the UK’s inflation control. Continued sound economic policies are crucial for sustainable growth and prosperity across society.
Inflation and Cost of living:
5p cut to fuel duty to continue for another 12 months
To provide relief to consumers, the government has announced that the 5p cut to fuel duty will be extended for an additional 12 months. This decision aims to ease the financial burden on individuals and businesses by reducing the cost of fuel.
Increase in repayment period from 12 to 24 months for new budgeting advance loans for people on low incomes
Extending the repayment period for new budgeting advance loans from 12 to 24 months provides flexibility and support for low-income individuals. This change eases the financial burden, making it easier to meet obligations and access needed assistance.
Abolishing £90 charge for obtaining a debt relief order
The decision to abolish the £90 charge for obtaining a debt relief order is a significant step towards supporting individuals who are facing financial hardship. By removing this financial barrier, more people will have access to the help they need to navigate their way out of debt.
Household Support Fund kept at the current level for another six months
The decision to extend the Household Support Fund brings relief to families during economic uncertainty, providing stability and resources to meet basic needs.
NHS and Medical Charities:
Nearly £6bn for the NHS, including £3.4bn for “outdated” systems and £2.5bn to “meet pressures in the coming year”
The significant allocation of funds to the NHS, totalling nearly £6bn, aims to modernise infrastructure, update systems with the latest technologies, and address upcoming healthcare sector pressures. This proactive approach supports high standards of care, helps meet increasing demands, and strengthens the healthcare system for patients and professionals.
£45m for medical charities, including £3m for Cancer Research UK
A £45 million donation to medical charities, including £3 million to Cancer Research UK, will significantly impact health. The funds support cancer research and treatment and provide hope to those affected. The donations show collective generosity in fighting illness.
Education and Child benefit:
£105m over the next four years to build 50 new special free schools
The UK government plans to invest £105 million in the next four years to establish 50 new special free schools. These schools will offer tailored education and support for students with special needs, aiming to enhance academic and social development. The initiative seeks to create inclusive learning environments and empower students, teachers, and families within the educational system.
High Income Child Benefit Charge threshold to be raised from £50,000 to £60,000
The increase in the High-Income Child Benefit Charge threshold from £50,000 to £60,000 benefits families by allowing more households to receive child benefits without facing extra charges. It supports families with different income levels, showing a commitment to easing financial burdens and fostering a more inclusive society.
Property Tax:
Reduction of higher capital gains tax rate on property from 28% to 24%
The decrease in the capital gains tax rate on property from 28% to 24% may attract more investors, encourage long-term property holding, stabilise the real estate market, stimulate economic growth, create job opportunities, and necessitate informed decision-making by investors and stakeholders in the real estate sector.
Non-dom tax status:
Abolishment of non-dom status – a Labour idea that will raise £2.7bn per year
The Labour Party proposes abolishing non-dom status to increase revenue by £2.7 billion yearly, promoting tax equity and ensuring fair contributions towards public services. This aims to create a balanced tax system, foster financial transparency, and address income inequality.
Alcohol and Tobacco:
Freeze on alcohol duty extended until February 2025
The decision to extend the freeze on alcohol duty until February 2025 has sparked mixed reactions. Some see it as a positive move for businesses and consumers amid uncertainty, while others worry about impacts on public health and government revenue. Debate on alcohol duty balancing economic recovery and social responsibility is expected to persist.
Introduction of excise duty on vaping products and one-off increase in tobacco duty
Recent government initiatives aim to reduce smoking-related illnesses by regulating vaping products and tobacco sales. An excise duty on vaping products controls accessibility and funds public health programs, while increased tobacco duty discourages smoking habits for a healthier population.
Safety:
£75m for violence reduction units and “hotspot policing”
The allocation of £75 million for violence reduction units and “hotspot policing” aims to enhance community safety, prevent crime, and build positive relationships with residents. These initiatives target high-crime areas, aiming to create safer communities for all to prosper.
Other measures:
Introduction of British ISA, allowing extra £5,000 investments in the UK
The introduction of the British Individual Savings Account (ISA) is an exciting development for investors in the UK. This new initiative allows individuals to invest an additional £5,000, providing them with more opportunities to grow their savings and secure their financial future. With this increased investment limit, individuals have the chance to explore a wider range of investment options and potentially see greater returns on their savings.
£1m towards a memorial for Muslims who died in the two World Wars
This memorial will stand as a reminder of all contributions made by Muslims during the two World Wars and the importance of recognising the diverse backgrounds of those who participated in these historic events. It serves as a symbol of unity and remembrance, ensuring that their stories are not forgotten and are celebrated for generations to come.
How CloudAccountant.co.uk can help you:
If you have any questions about how the Spring Budget might affect your finances as a business owner or sole trader or would like to know more about how we can customise an accountancy solution to your needs, you can contact us by emailing
info@cloudaccountant.co.uk, calling us on 01625 546 232, or simply fill in the enquiry form here.