Your 2024 Budget Breakdown
A few weeks have passed since the Chancellor, Jeremy Hunt, presented his Spring Budget to the House of Commons and the world at large. The dust has now settled, and it's time to take a clear, cool look at the implications for UK business.
The budget includes several fundamental policy changes and financial adjustments designed to impact various sectors of the UK economy. How will these affect your business, your employees, and the wider public?
Cuts in National Insurance
NI reductions for Company Directors and Employees
The government's decision to reduce National Insurance contributions (NICs) further builds on previous cuts announced in the Autumn Statement of 2023. The Class 1 NIC rate will be lowered by 2 percentage points for employees and company directors, from 10% to 8%, starting 6 April 2024. This change follows an earlier reduction of 2p, aiming to ease the financial burden on approximately 29.8 million workers across the UK.
Despite these reductions for employees, the rate for employers' Class 1 NICs will not change. This, combined with rising National Minimum Wage and National Living Wage rates from 1 April 2024, may increase employment costs for many UK businesses.
NI Reductions for Self-Employed Workers
Self-employed individuals will also see a reduction in their Class 4 NICs by an additional 2 percentage points, on top of a 1p cut previously announced. This means a total decrease of 3 percentage points, from 9% to 6%, effective from 6 April 2024. Additionally, the abolition of Class 2 NIC contributions further reduces the financial load on the self-employed, signifying substantial annual savings.
VAT Threshold Adjustments
From 1 April 2024, the government will significantly increase the VAT registration threshold from £85,000 to £90,000 - the first adjustment since 2017. Similarly, the deregistration threshold will rise from £83,000 to £88,000. This shift aims to alleviate the VAT burden on small businesses, exempting an additional 28,000 businesses from the obligation to charge VAT.
However, concerns about the VAT threshold's 'cliff-edge' effect remain, as it incentivises businesses to limit their growth to stay below the threshold.
Enhanced Tax Measures and Support
Capital Gains Tax and Furnished Holiday Lettings
The reduction in the higher rate of Capital Gains Tax for residential property sales from 28% to 24%, effective from 6 April 2024, seeks to stimulate the property market. Moreover, abolishing the furnished holiday lettings tax regime by 6 April 2025 aims to equalise the taxation of short-term and long-term rental properties.
Support for the Creative Industries
The budget includes over £1 billion in tax reliefs for the creative industries, such as business rate reliefs for film studios and new tax credits for independent films. These measures are designed to bolster the UK's creative sector and support cultural institutions.
Extension of Capital Allowances
The plan to extend full expensing to leased assets addresses a significant disparity in the current system. This will enable more businesses to deduct the full cost of qualifying investments from their Corporation Tax bill. This change promises to encourage further investment across various sectors.
Alcohol and Fuel Duty Freezes
The continuation of the Alcohol Duty freeze until 1 February 2025, and the 5p Fuel Duty cut extensionuntil March 2025 represent significant relief measures for the hospitality industry and motorists. These freezes help to stabilise costs in the face of inflationary pressures.
Initiatives for Savers and Investors
Introducing a new British ISA and Savings Bonds aims to promote investment in UK companies and support long-term savings. These measures incentivise individuals to engage with the financial markets and support economic growth.
Reforms to Child Benefit and the Non-Dom Regime
Changes to the High Income Child Benefit Charge threshold and the restructuring of the non-dom tax regime reflect the government's effort to address fairness and complexity in the tax system. The increase in the Child Benefit Charge threshold and the revision of the non-dom regime are poised to impact high earners and international residents, aiming for a more equitable tax landscape.
How will the Spring Budget affect you?
We hope this summary of the budget measures is useful. Do you have any questions about how the new measures will affect your business or your personal situation?
Get in touch today. We're ready to help.