Spring Budget Breakdown: An Essential Guide for Business Owners - Fleximize

Spring Budget Breakdown: An Essential Guide for Business Owners

6th March 2024

Chancellor Jeremy Hunt announced his Spring Budget on March 6th 2024, accompanied by a full fiscal statement from the OBR, which detailed the government's tax and spending plans with investment a key priority.

Economic priorities previously set out by the Prime Minister were to halve inflation, grow the economy and get debt failing. In the Spring Budget, it was stated the government was delivering on these priorities with falling inflation, more resilient growth than expected and debt forecast to fall.

Jeremy Hunt maintained British businesses are growing in confidence, stating "people power" with new plans to tackle the current economy with lower taxes, more growth and more funding for public services.

Here are the key takeouts for business owners:

VAT Registration Thresholds

The government announced there would be an increase in the VAT threshold for small businesses from £85,000 to £90,000 and an increase in the de-registration threshold from £83,000 to £88,000. These changes are effective from April 2024.

This will mean that, on average, 28,000 fewer small businesses will need to be VAT registered this tax year. In its effort to support small businesses, the government anticipates this move to stimulate growth and productivity. However, opinions vary regarding the efficacy of the £5,000 increase. Some argue that the increment might not be substantial enough to significantly impact growth as envisioned by the Chancellor.

The announcement has evoked mixed reactions within the business community. While some welcome the threshold adjustments as a step in the right direction towards supporting small businesses, others express reservations about the adequacy of the increase to drive substantial growth.

Despite the scepticism surrounding the magnitude of the threshold increase, there remains optimism about the potential growth opportunities for small businesses. The adjustment could enable these enterprises to retain more earnings, invest in expansion initiatives, and innovate within their respective sectors. This, in turn, could enhance the competitiveness of small businesses in the marketplace, thereby contributing to economic resilience and job creation.

National Insurance Contributions

The main rate of Class 1 employee national insurance contributions will be reduced by another 2p from 10% to 8% from the 6th of April 2024. And for the self-employed, Class 4 NICs will reduce from 9% to 6%.

An average worker on £35,400 that you employee will save more than £900 a year as a result of the cuts. On the other hand, an average self-employed person with £28,000 will save about £950 a year. The biggest gainers from these cuts are people earning £50,000 and more a year.

This cut is beneficial not only for individuals but also for small businesses. It will help them save money, which they can use elsewhere for business or personal use. This policy change is a testament to the government's commitment to supporting the growth and prosperity of small businesses.

Capital Gains Tax

As per the Government's announcement, the higher rate of Capital Gains Tax on residential properties will be reduced from 28% to 24% starting from 6th April 2024. The lower rate will remain at 18%. These changes are expected to directly impact two key sectors, the property market and residential construction, and it's crucial for these industries to be prepared for the upcoming adjustments.

Boost to AI Ecosystem

The Chancellor announced the doubling of investment for the Alan Turing Institute, which brought it to £100 million. Over the next five years, the package will build on the work to date and help address health, environment and sustainability challenges. An update was also provided on the AI Safety Institute's progress in delivering against its goal of testing the most advanced systems.

The main advantages of increasing the AI investment are:

As AI investment accelerates, policymakers must proactively ensure that smaller businesses have the necessary support and resources to adopt and integrate AI effectively. This includes access to training programs and regulatory frameworks that promote responsible and ethical AI deployment, fostering a fair and inclusive AI landscape.

Fuel and Energy

Fuel duty has been frozen again with a 5p cut on petrol and diesel for another year. The windfall tax on oil and gas companies, due to end in March 2028, has been extended by another year. Britain's flagship renewables scheme has received its biggest-ever funding boost to drive further investment into the UK's renewables sector.

Many self-employed individuals, such as tradespeople, contractors, delivery drivers and small business owners, rely heavily on vehicles for their work. With the need to travel more to reach clients, transport goods or provide a service, the 5p cut in fuel duty will benefit these people the most by:

Alcohol Freeze Duty

The government's decision to extend the beer, cider, and wine duty freeze from August 2024 to February 2025 is significant. This extension, which builds upon the previous duty freeze announced in the autumn statement, is expected to benefit the UK's 38,000 pubs.

The extension of the alcohol duty freeze is not just a policy measure but a direct support to businesses in the hospitality industry. It is a catalyst for consumer spending, a shield for maintaining competitiveness, and a gateway to growth and investment opportunities.

Other measures that may be of interest:

For more information, you can view the full 2024 Spring Budget here.