As the dust settles on Chancellor Jeremy Hunt’s unveiling of the 2024 Spring Budget, small business owners across the UK are left dissecting its implications. From National Insurance adjustments to VAT threshold changes, the budget holds plenty of changes that can significantly impact SMEs.
In this blog, we’ll break down the key measures outlined in the budget and what they mean for SMEs, freelancers, and self-employed individuals.
National Insurance cut
The headline-grabbing announcement of a further 2% point cut in employee National Insurance contributions has gained plenty of attention. Building on last year’s reduction, this move brings employee contributions down to 8%. For employers, this requires adjustments to payroll processes ahead of the 6th April implementation date.
However, the picture becomes a bit more nuanced for self-employed individuals. Currently, those earning profits above £12,570 annually are subject to both Class 2 and Class 4 National Insurance Contributions. In the previous Autumn Statement, Chancellor Hunt announced the scrapping of Class 2 contributions, effective from 6th April 2024.
Moreover, Class 4 contributions are slated to decrease from 9% to 8% on profits between £12,570 and £50,270. The latest budget further slashes the Class 4 rate to 6% on profits within this bracket. With these changes, the government anticipates savings of up to £650 for the average self-employed worker, building upon previous reforms.
Full expensing for leased assets
In a boon for businesses, the budget introduces full expensing for leased assets, a move previously reserved for purchased assets. This initiative allows companies to deduct 100% of qualifying investments’ total cost from taxable profits in the year of expenditure.
While specific criteria for eligibility await clarification in forthcoming legislation, the government’s examples encompass a broad spectrum of business essentials, from machinery to office equipment. The permanence of this measure underscores the government’s commitment to building a conducive environment for business investment, with an estimated annual tax cut of £10 billion.
Increased VAT registration threshold
Recognising the administrative burden imposed by VAT on small businesses, the government has opted to raise the VAT registration threshold. Currently set at £85,000, this threshold will increase to £90,000 come April 2024.
This adjustment is projected to exempt around 28,000 small businesses from VAT obligations, offering welcome relief to entrepreneurs navigating complex tax structures.
Fuel duty freeze
Against a backdrop of economic uncertainty, the continuation of the fuel duty freeze until March 2025 offers a reprieve for both consumers and sole traders reliant on vehicular transport.
By maintaining the 5p cut introduced in 2022, the Chancellor aims to alleviate financial strain on motorists, with the average car driver poised to save £50 annually. This intervention averts a potential steep increase in fuel duty, safeguarding against inflationary pressures.
Help for hospitality
The hospitality sector, a cornerstone of the UK economy, receives targeted support in the form of extended alcohol duty freezes. Pubs and hospitality businesses stand to benefit from the extension until February 2025, forestalling a 3% point increase. By enabling establishments to maintain competitive pricing, the government endeavours to encourage consumer spending and stimulate economic activity within the sector.
Recovery loans
Continuing the trajectory of post-pandemic support, the government is allocating £200 million to help small business investment and growth. This extension of the Recovery Loan Scheme, now rebranded as the Growth Guarantee Fund, focuses on the government’s commitment to economic recovery. Eligible businesses with a turnover of £45 million or less can access vital financial assistance, provided they meet viability criteria.
Furnished holiday lettings regime abolition
In a move aimed at streamlining taxation and addressing housing shortages, the Furnished Holiday Lettings tax regime is set to be abolished. This overhaul seeks to generate £245 million annually while simplifying tax provisions for property owners.
The abolition, effective from April 2025, marks a significant departure from existing regulations, potentially reshaping the landscape for property investors and holiday let operators.
If you’d like to discuss any aspects of this budget, or you have questions about any aspect of your finances, please get in touch with the Trinity team. We’d love to help!
