Spring Budget 2024: What business tax measures can the UK expect?

All eyes were on Chancellor Jeremy Hunt this week and his Spring Budget 2024 speech, with the self-employed, landlords and business owners all hoping that Chancellor would make some tax cuts and reduce the tax burden ahead of this year’s general election.

We’ve listened to the Spring Budget today and the fiscal announcements made and summarised them in this blog, along with details of business tax measures that may affect you and your business.

National Insurance

The predicted announcement of this Budget was the 2p cut in employee national insurance rates; cutting National Insurance from 10% to 8%. Reducing National Insurance Contributions by another 2p on top of the 2p cut last year in Autumn Budget, will save the average worker another £450, meaning an overall tax bill saving for an average worker of £900 per year.

While this is good news for taxpayers generally, fiscal drag over the last few years with income tax thresholds being frozen, means that many taxpayers will still be worse off.

Great news for the self-employed with the Chancellor announcing Self Employed national insurance will be cut from 8% to 6% meaning an average tax cut for a self-employed person of £650.

VAT registration threshold increase

Today’s announcements also saw the first increase in the VAT threshold in 7 years. From April 1st, the VAT registration threshold will be increased from £85,000 to £90,000. Good news for small businesses nearing the threshold as it may well ease the additional administration caused by having to become VAT registered.

Property taxation

We saw a focus and some large announcements on property taxation at this year’s Spring Budget, covering Furnished Holiday Lettings (FHL), Stamp Duty Land Tax (SDLT) and Multiple Dwellings Relief (MDR). The announcements on property tax were as follows:

Abolishing the furnished holiday lettings regime

There was a huge blow for those people that currently benefit from the special tax rules (especially the offsetting of the mortgage interest and low Capital Gains Tax rate) for rental income from properties that qualify as Furnished Holiday Lettings (FHLs), when the Chancellor announced that he was going to abolish the furnished holiday lettings regime from April 2025.

Stamp Duty Land Tax relief for multiple dwellings

There was also a shock announcement on stamp duty land tax relief for people who purchase more than one dwelling in a single transaction known as Multiple Dwellings Relief. After seeing no strong evidence showing its benefits, and evidence that it was being regularly abused, the Chancellor also announced the abolition of this relief for transactions completing after 1 June 2025.

Capital Gains Tax (CGT)

Good news however, on Capital Gains Tax on property when the announcement was made on the reduction of higher rates of property Capital Gains Tax from 28% to 24%.

Non-domicile Concept

There was a major announcement of the abolition of the current non-domicile tax regime. From April 2025, there will be a simpler residency-based system introduced, giving new arrivals to the UK a four year period of UK residency in which they will not pay any tax on foreign income or gains. After four years, those who continue to live in the UK will pay the same tax as other long-term UK residents. However, there will be transitional arrangements whereby, individuals will benefit from a two year period in which individuals will be encouraged to bring in overseas wealth to the UK to spend and invest here, which would be taxable at 12%.

Inheritance tax

The government plans to change how Inheritance Tax (IHT) works by linking it to the residence of the beneficiaries of the estate, similar to the Irish system. They will discuss the details later. These changes won’t happen until after April 6, 2025.

High Income Child Benefit Charge

The High Income Child Benefit Charge (HICBC) will be administered on a household rather than an individual basis by April 2026, with a consultation in due course, while around half a million working families will benefit from an increase in the threshold from £50,000 to £60,000 and raising the level at which Child Benefit is fully repaid to £80,000 – worth £1260 per family on average.

Capital allowances and full expensing

In the Spring Budget last year, the government announced the introduction of full expensing from April 2023 to the end of March 2026. Full expensing allows companies to claim 100% capital allowances first-year relief on qualifying plant and machinery investments.

Today, the Chancellor went one step further on full expensing and extended it to leased assets as well as purchased assets. The timeline for this is uncertain as the Chancellor said it would be introduced ‘as soon as it’s affordable’. We’ll continue to look into this and will notify you when more details emerge.

British ISA

The ISA system is set to undergo reform with the introduction of a "British ISA." This will add a £5,000 allowance on top of the existing £20,000 ISA limit for investing in UK equities. Details will be finalized after consultation later in the year.

Recovery loan scheme/Growth guarantee scheme

For SMEs looking to grow and needing finance, a further £200m was announced to fund the extension of the recovery loan scheme as it transitions to the growth guarantee scheme. This is good news for SMEs looking for future finance.

The Recovery Loan Scheme supports small and medium sized businesses to access the finance they need to grow and invest. Finance can be used for any legitimate business purpose, including working capital or investment.

Pensions & investments

Today’s announcements about pension reforms, didn’t go as far as predicted around UK pension investment, but what the Chancellor did announce was the following:

• Continuing to explore how savers can be allowed to take their pension pots with them when they change job.
• A new British savings bond delivered through National Savings and investment, offering savers a guaranteed rate fixed for three years.

Alcohol duty

Good news for pubs and hospitality businesses with announcement of the freeze of alcohol duty.

Fuel duty freeze

The Chancellor today announced again the freezing of fuel duty for another 12 months. This will once again help businesses with high fuel costs to ease one of the areas of rising business costs.

Overall OBR forecast

The Office for Budget Responsibility (OBR) forecast on the UK economy, shows inflation falling from 11% to 4% and further reducing to 2% in the coming months.

The OBR forecast was that headline debt would rise to above 100% of GDP. Today they will say it will fall every year to just 94% by 2028/29. Underlying debt which excludes Bank of England debt will be 91.7% in 2024/5 according to the OBR and falling to 92.9% in 2028/29.

The UK continue to have the second lowest level of government debt in the G7 lower than Japan, France or the United States. The Government also announced meeting their second fiscal rule for public sector borrowing to be below 3% of GDP three years early, as borrowing falls from 4.2% of GDP and down to 1.2% in 2028/29. By the end of the forecast, the UK will have achieved its lowest level of GDP since 2001.

Now the OBR expects the economy to grow by 0.8% this year and 1.9% next year, 0.5% higher than their autumn forecast.

Other changes from April 2024 previously announced to be aware of

In last year’s Autumn Statement, there were announcements that also come into effect from April this year. Here’s our round up and reminder of those other tax changes that will come into effect.

Capital gains tax

From April 2024, the capital gains tax exemption will be halved. Under current rules, you can make gains of up to £6,000 before paying any tax. From 6 April 2024, the capital gains tax exemption will be reduced again to £3,000.

Income tax

From 6 April 2023, the threshold for the top rate of 45% for higher rate taxpayers has fallen from £150,00 to 125,140. Add this to fiscal drag over recent years due to income tax thresholds and personal allowance being frozen, it means many people are still worse off.

Dividend allowance

Last year the dividend allowance was reduced from £2,000 to £1,000. From April 2024, the allowance will be just £500.

R&D tax relief

From 1 April 2023, the introduction of the merged scheme. This change combines the current RDEC and R&D SME scheme into a merged scheme.

The measure establishes an above the line credit that allows companies to claim for their qualifying R&D costs, including contracted out R&D, and incorporates the more generous SME scheme PAYE and National insurance contributions cap. It also includes restrictions on relief for overseas expenditure which will come into effect for accounting periods beginning on or after 1 April 2024.

The rate offered under the merged scheme will be implemented at the current RDEC rate of 20%.

The notional tax rate applied to loss-makers in the merged scheme will be the small profits rate of 19%, rather than the 25% main rate set in the current RDEC.

Business rates in England

From 1 April 2024, the small business multiplier will be frozen for another year in England. The 75% Retail, Hospitality and Leisure relief will be extended for 2024/25. The standard multiplier will be uprated in line with September’s Consumer Prices Index.

The National Living Wage and National Minimum Wage

Both the National Living Wage (NLW) and the National Minimum Wage (NMW) will increase from 1 April 2024. The NLW will also be extended to 21 and 22-year-olds.

The rates applicable from 1 April 2023 will be:

NLW £11.44

18-20 year olds £8.60

16-17 year olds £6.40

Apprentices £6.40

The apprenticeship rate applies to apprentices under 19 or 19 and over in the first year of apprenticeship. The NLW applies to those aged 21 and over.

Pension lifetime allowance

From 2024/25, the Pensions Lifetime Allowance (LTA) will be abolished, allowing you can take as much income as you want from your pension (still subject to income tax) and checks will only be made on lump sums taken.

Summary

The Spring Budget 2024 predictions were in short supply this year and now with clarity around the governments tax and spending plans.

We see the current government focused on cutting taxes for the average working person ahead of this year’s general election. However, it was disappointing to not see any announcements on reduction in personal tax rates and increase in the IHT Nil Rate Band.

There were already rumours on the changes to non-dom status, and these reforms were largely anticipated. The scope of the announced changes was unexpectedly broad, exceeding most people’s expectations and there will be a lot of work required in this area for advisors.

Property investors and landlords were particularly hit today with announcements. We were hoping for more tax cuts to help landlords, self-employed and business owners, so we’re disappointed not to see these coming through.

We would advise all clients to begin to plan for these changes and other previous announced changes prior to April 6th. If you require further help and advice or for more information and bespoke tax planning advice, contact dns accountants today on 03300 886 686, or email on enquiry@dnsaccountants.co.uk.

About the author

Siddharth Agarwal
I am a Chartered Tax Advisor (OMB) and ACCA. I have 9+ years of experience in owner-managed business taxation issues, company reorganisations, property taxation, and succession planning. I also work with private clients on bespoke tax planning strategies for trusts, residence status, and non-residents. I aim to fulfil my professional duties towards my clients and keep them satisfied, my utmost priority. I believe in establishing and maintaining businesses and personal relationships as the key to mutual growth.