Although Chancellor Jeremy Hunt claimed small businesses were close to his heart during his Spring Budget speech, many of those who represent the UK’s 5.5m SMEs were left distinctly underwhelmed.
They of course welcomed the government’s increase to the VAT registration threshold, from £85,000 to £90,000, which will be introduced on 1 April, as well as the extension of the Recovery Loan Scheme. But many claimed the Budget could have done more to encourage economic growth and address other serious challenges facing UK businesses.
“I will provide £200m of funding to extend the Recovery Loan Scheme, as it transitions to the Growth Guarantee Scheme, helping 11,000 SMEs access the finance they need.
And following representations from the Federation of Small Businesses [and others], I will reduce the administrative and financial impact of VAT by increasing the VAT registration threshold from £85,000 to £90,000 from April 1st – the first increase in seven years. This will bring tens of thousands of businesses out of paying VAT altogether and encourage many more to invest and grow." Chancellor of the Exchequer, Jeremy Hunt.
Federation of Small Businesses Policy Chair, Tina McKenzie, said: "We welcome the VAT threshold increase and cut to self-employed National Insurance contributions. We were also pleased to see commitments to make progress on the HMRC administrative burden and national roll-out of the Business Energy Advice Service, as well as extending the Recovery Loan Scheme. That said, many businesses face serious challenges – not least through rapid hikes in labour and input costs – and many will have understandably hoped [for] more measures that would help ease the tough decisions small employers are having to make day-in day-out."
Dr Roger Barker, Director of Policy at the Institute of Directors, was rather less impressed. He said: "There was little that can be regarded as a game-changer for businesses, which still face the prospect of an economy that’s unlikely to experience meaningful growth for some time. The extension of the Recovery Loan Scheme was welcome; the Chancellor’s commitment to extend full expensing to leasing was also helpful. Although cuts to National Insurance and boosts to child benefit provision may attract some people back into the workforce, the Budget offered little to address the economy’s deep-seated skills gaps. Clearly this was a Budget aimed at rallying political support rather than addressing the UK’s longer-term economic issues. It fell short of delivering a comprehensive plan for sustainable growth and investment."
Spring Budget 2024: more reaction
Shevaun Haviland, Director General of the British Chambers of Commerce (BCC), said: "Following the Autumn Statement, this Budget was always set to deliver less for business, although changes to National Insurance will provide some momentum. However, beyond this there were no major announcements to help shift the dial on conditions for business. The clock is now ticking to the General Election – and this Budget could be the last fiscal event before voters go to the polls. Business confidence is improving, but the coming months will remain challenging for many companies. It is vital that the economy remains front and centre of the campaign to come."
Andy Chamberlain, Director of Policy at IPSE (the Association of Independent Professionals and the Self-Employed), said: "It’s positive that the Chancellor has heeded IPSE’s call to raise the VAT registration threshold. This increase, while modest, will alleviate a barrier to the growth of our smallest businesses. And while the cut to National Insurance will be welcomed by the UK’s 4.2m self-employed, any benefit may well be undermined by frozen thresholds and continued inflation."
Alex Henderson, Tax Partner, PwC, said: "An increase in the VAT registration threshold will be welcomed by smaller businesses since, as well as the tax cost, there is also the administration burden, which always falls proportionately more heavily on smaller businesses with limited resources to deal with it."
Tim Sarson, Head of Tax Policy at KPMG UK, said: "We witnessed a Budget that focussed on supporting families and workers ahead of an impending election, but there were few announcements of note for businesses. The extension of full expensing to leasing has been largely anticipated, although the Chancellor’s comment that this would happen when ‘finances allow’ may raise some eyebrows as to timing."
Round-up of the main announcements
Business taxes
- VAT: the VAT registration threshold is increasing from £85,000 to £90,000 from April 2024. The deregistration threshold is also increasing from £83,000 to £88,000
- Investment: full expensing is to be extended to leased assets (subject to fiscal conditions)
- Recovery Loans Scheme: will be extended until the end of March 2026 (note: this has been renamed the Growth Guarantee Scheme)
- Business rates: the empty property relief reset period will be extended from six weeks to three months, from 1 April 2024
- Business rates: the Budget introduces a new 40% relief on gross business rates bills for eligible film studios in England, until 2034
- Independent Film Tax credit: films with production budgets below £15 million will be able to claim an enhanced credit of 53% on their qualifying expenditure
- Tax reliefs for theatres, orchestras, museums and galleries: from April 2025, these will be permanently set at 45% for orchestras, theatres, museums and galleries touring shows and 40% for non-touring shows
- Energy profits levy: has been extended until March 2029 (but legislation will be included in the Spring Finance Bill to remove the levy when prices return to normal)
Personal taxes
- National Insurance: employee NICs will be reduced by a further 2% from April 2024
- Self-employed National Insurance: will be further reduced (in addition to the announcement in the Autumn) to 6% from April 2024
- Non-domiciled taxation: the current non-dom tax regime will be abolished from April 2025. Thereafter, new arrivals to the UK will not be required to pay tax on foreign income for their first four years here. After that, they will pay tax at the same rate as other UK taxpayers. Transitional arrangements for existing non-doms will offer temporary 50% taxation exemptions and the ability to rebase the value of capital assets
- Capital Gains Tax on residential property: reducing from 28% to 24% from April 2024
- Furnished Holiday Lettings tax regime: to be abolished from April 2025
- British Savings Bonds: from April 2024 NS&I will launch a product offering a guaranteed interest rate, fixed for three years
- New British ISA: an additional £5,000 tax-free allowance for investments in UK assets
- Inheritance tax: from 1 April 2024, personal representatives will no longer need to have sought a commercial loan to pay inheritance tax before applying to obtain a "grant on credit" from HMRC
Duty rates
- Fuel Duty: frozen at current rates for a further 12 months
- Alcohol Duty: freeze on alcohol duty extended until February 2025
- Vaping: a new duty will be introduced from October 2026 (Tobacco Duty will be increased at the same time to maintain the disincentive to smoke)
- Air Passenger Duty: frozen for domestic and short-haul flights but increasing for business class travellers
- Landfill Tax Rate: from 2025/26 landfill tax will increase to £126.15 per tonne and the lower rate will increase to £4.05 per tonne
- Stamp Duty: relief for those buying more than one property at a time will be abolished from April 2025
- Capital Gains Tax on property: this will be reduced from 28% to 24% from April 2024
Other announcements
- Household Support Fund: this will be extended for a further six months until September 2024
- Child benefit reform: the high-income charge threshold will be increased to £60,000 from April 2024 and a higher taper from £60,000 to £80,000 from April 2026
- Child benefit reform: the benefit will be amended to be based on household income rather than by individual from April 2026
- Debt Relief Orders: the £90 charge will be abolished from April 2024
Written by Mark Williams and Fiona Prior