Spring Budget Breakdown: An Essential Guide for Business Owners

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.

• Reducing the rate of Capital Gains Tax will provide a significant advantage to investors and individuals. This change will encourage them to engage in property transactions more frequently, allowing them to retain a larger portion of their profits. This, in turn, will positively impact the property market and stimulate investment.
• The anticipated increase in property transactions due to the reduced Capital Gains Tax could lead to a surge in demand for new construction and development projects. This could stimulate significant economic growth in the construction sector, providing a promising outlook for the industry.

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:

• Smaller businesses may have access to more advanced AI tools at an affordable rate. AI solutions can help automate tasks, improve efficiency and make data-driven decisions.
• Smaller businesses, often constrained by resources, can now envision a future where they compete more effectively with giant corporations. With increased investment in AI, these businesses can leverage AI-powered tools, such as customer service automation, predictive analytics, personalised marketing, and inventory management, to their advantage.
• AI investment holds the promise of technological advancement and significant job creation in the AI industry and related sectors, painting a bright future for the workforce.

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:

• Significant savings at the pump. It directly alleviates the financial strain on self-employed individuals, reducing their operating costs and providing much-needed relief.
• By maintaining competitive prices, self-employed individuals can stay afloat and thrive in their respective markets. The fuel duty freeze empowers them to do so, giving them a competitive edge.
• Lower fuel costs directly translate into a boost in income for self-employed individuals. It makes their earnings more predictable and ensures that fuel expenses remain affordable, fostering a sense of security.

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.

• The duty freeze ensures stable pricing for alcoholic beverages, which is a positive for both businesses and consumers. This cost stability allows companies to plan their budgets without fearing sudden tax hikes, providing a predictable environment for all. Consumers may feel more inclined to dine out or visit bars and pubs when prices remain consistent.
• Businesses can maintain profit margins without the pressure of increased taxes.

Other measures that may be of interest:

• £44m additional funding in research projects for Cancer Research, Dementia and Epilepsy.
• Stamp duty relief abolished for people buying multiple properties in one transaction
• £1m towards memorial for Muslims who died in two World Wars
• £3.4bn for NHS "outdated" IT systems

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