After the Spring 2024 Budget announcement last week there are some key changes that may have a significant impact on a lot of businesses. Our job is to make sure that you have all of these details to hand and understand the changes that will effect you in the coming financial year. Navigating through the evolving financial landscape will help you to make informed decisions that will benefit your business in years to come.
If you would like to see the full budget report you can find a copy on the Gov.uk website here.
We will now delve into some of the points raised in the Spring 2024 Budget and explain what each of these changes mean.
VAT Threshold Increase:
For businesses operating around the VAT threshold, the increase from £85,000 to £90,000 provides an opportunity to accept more work without having to register for VAT. This change could positively impact small SMEs operating close to the threshold.
National Insurance Contributions:
The reduction in the main rate of primary Class 1 National Insurance contributions from 10% to 8% starting from April 6, 2024, is a welcomed move. We advise that you adjust payroll processes accordingly.
For self-employed individuals earning profits above £12,570, the main rate of Class 4 contributions will be reduced to 6%. Class 2 contributions (mandatory payments set at £3.45 per week) will be scrapped from April 6, 2024, simplifying the National Insurance landscape.
Capital Allowances and Full Expensing:
Capital allowances are like a tax break that helps businesses lower the amount of tax they have to pay. Businesses can use these allowances to subtract the value of certain things, like equipment, machinery, and specific vehicles, from their profits, which means they end up with a smaller tax bill.
There’s something called “full expensing,” which is a special allowance that lets companies deduct 100% of the total cost of certain investments from their taxable profits in the first year they spend the money. The government hasn’t given a clear list of what qualifies for full expensing, but they’ve given examples like computers, printers, lathes, office equipment, non-car vehicles (vans, lorries, tractors), construction equipment, and certain things in non-residential places, like kitchen and bathroom fittings and fire alarm systems.
Before, full expensing was only temporary, but in the 2023 Autumn Statement, they made it a permanent thing. Now, in the 2024 Spring Budget, they’re planning to make full expensing apply to leased things too, as long as it’s affordable. Right now, it only works for things that a business buys. The Chancellor mentioned that there will be some new rules on full expensing published in a few weeks, so we’ll have to wait and see what happens next.
Freezing Fuel Duty:
The temporary freeze on fuel duty aims to ease operational costs for businesses reliant on transportation, providing stability amid fluctuating fuel prices. Even though this will offer a little breathing space for businesses, it is important to be aware it is a temporary freeze which means the problem will arise but just further down the road.
Alcohol Duty Freeze:
Businesses in the drinks and hospitality industry will benefit from the extension of the freeze on alcohol duty until February 2025, offering support and stability. Similar to the fuel duty, this is also a temporary freeze pushing the problem down the road.
Investment in Advanced Manufacturing:
A £270 million investment in advanced manufacturing industries with a focus on zero-emission, clean motor, and aviation technology is anticipated. We look forward to seeing how this will be implemented.
Government Funding for Small Businesses:
An additional £200 million of funding has been allocated to help small businesses invest and grow, extending support through the government’s post-pandemic Recovery Loan Scheme. To be eligible for a loan, UK businesses must have a turnover of £45 million or less, must be viable and must not be in financial difficulty. More eligibility details and further information can be found at Gov.uk.
Capital Gains Tax Reduction:
From April 6, 2024, Capital Gains Tax on residential property will be reduced to 24% for gains that fall within the higher rate tax band. The rate CGT on gains within the basic rate threshold remain unchanged at 18%.
Furnished Holiday Lettings Tax Abolishment:
For those involved in holiday lettings, it is crucial to note that the Furnished Holiday Lettings tax will be abolished from April 2025. This change will impact rental income and associated tax provisions.
We do understand and appreciate that each and every business is unique and therefore the impact of these changes may vary from one business to another. If the recent Spring Budget announcements have concerned you and you’d like to delve deeper into how these changes will specifically affect your business or would like to discuss tailored strategies then we are happy to arrange a phone call or meeting with you.
Call us on 01752 220979 to find out how these changes will impact you and your business.