Spring Budget 2024: Navigating the Landscape – Key Insights from Ascentis Accountants
The Spring Budget 2024, potentially the last before the general election, has been delivered by Jeremy Hunt today and we’ve unpacked the key takeaways and their potential impact on your business.
Tax Impact
Tax relief is on the horizon for both employees and the self-employed as the government announced further reductions to National Insurance (NI) contributions. Effective from April 6th, 2024, Class 1 Employee NI contributions will see a decrease from 10% to 8%, while Class 4 NI contributions for the self-employed will now drop from the current 9% to 6%. There is no corresponding cut to employer NI contributions and so businesses will continue to pay contributions of 13.8%, which seems counter-intuitive to any ambitions to encourage growth in the economy.
Property & Landlords
Changes are afoot for landlords and property investors. The Capital Gains Tax rate on residential property will be reduced from 28% to 24% with effect from 6 April 2024, which may prompt some sellers to defer selling their properties until after that date. The Furnished Holiday Lettings Relief scheme will be scrapped from April 2025, one of the biggest impacts of which will be that any mortgage interest will now be subject to the same restrictions as for residential properties let on a long term basis, where previously it was unaffected. Finally, the stamp duty multiple dwellings relief for simultaneous purchases of multiple properties will be abolished from June 2024.
Significant tax changes have been announced for individuals resident in the UK but not permanently settled here (known as non-domiciled). For those individuals the remittance basis of taxation will be abolished from 6 April 2025. It will be replaced with a simpler residence-based regime and new arrivals to the UK will not pay UK tax on their overseas income and gains for their first 4 years of UK residence. For individuals already in the UK and using the remittance basis a set of transitional rules will be made available.
VAT Registration
From 1 April 2024, the VAT registration threshold and deregistration thresholds will each increase by £5,000 to £90,000 and £88,000 respectively. The Chancellor has stated that this could result in thousands of businesses being exempted from VAT registration although there has been no change to these thresholds since 2017 and with significant inflation since then it could be argued they are long overdue and perhaps do not go far enough.
A significant boost for business investment by larger companies is expected with the introduction of draft legislation allowing full expensing of leased assets. While the exact timeline for implementation remains undetermined, this initiative aims to incentivise investment in essential equipment. For small businesses investing up to £1m per year the Annual Investment Allowance remains available and this announcement is mainly beneficial to companies that spend in excess of that each year on items such as plant and machinery.
The high-income child benefit charge will see a temporary adjustment, with the claw back threshold increasing to £60,000 and tapering to £80,000. However, the government plans a long-term reform, shifting the system to a household-based approach.
Other Points From The Spring Budget
Other key points include:
- The vaping industry will be subject to a new tax on vape products.
- To stimulate the creative sector, tax credits of 5% will be available for eligible film studios, alongside a 40% tax relief.
- £200 million in additional funding to extend the recovery loan scheme, supporting small businesses and SMEs.
- A new tax on non-economy flights, while planned growth in day-to-day spending will be maintained at 1% in real terms.
- An increase in tobacco duty.
- Guaranteed rates paid to childcare providers over the next two years as part of the government’s boosted childcare offer, potentially impacting childcare costs for families.
Where the government gives with one hand (e.g. NIC cuts for workers) they make take with the other hand (e.g. frozen income tax thresholds) and it can be hard to keep up.
It will be interesting to see how many of the following announcements survive the general election due later in the year, especially if there is a change of government and the implementation date of a change is not until after the election.
Impact On Your Business
Navigating the changing landscape can be complex. While this information provides a detailed overview of the key measures, it’s crucial for businesses to carefully consider the specific implications for their individual circumstances and sector.
Seeking professional advice from qualified financial advisors can be invaluable in ensuring compliance and making informed decisions in the evolving economic climate.