Following Wednesday’s Spring Budget announcement, we are pleased to provide you with a quick overview of the key updates.
Chancellor Jeremy Hunt’s unveiling of various measures aimed at supporting economic recovery and encouraging growth presents both opportunities and considerations for businesses like yours.
As always if you have any questions or require clarification on any of these issues, please contact the team on info@dvm.co.uk
- National Insurance Cuts
- Income Tax: No Changes to Rates or Bands
- Changes to the High-Income Child Benefit Charge
- Corporation Tax Remains Largely Unchanged
- VAT Threshold Increase
- Recovery Loan Scheme Extended
- AI Funding For Small Businesses
- CGT Residential Property Rate Change
- Furnished Holiday Lettings Tax Overhaul
- Regulating Tax Advisers
- Non-Dom Rules Abolished
National Insurance Cuts
The Chancellor announced cuts to the rates of National Insurance Contributions (NIC) for employees and the self-employed for the second time in less than four months (although frozen tax thresholds effectively offset the benefits, as explained in the next section below).
From 6 April 2024, the headline rate of NIC will fall from 10% to 8% for employees, and from 8% to 6% for the self-employed. The government will also consult on how it will abolish Class 2 NIC. This means an employee on a salary of £35,000 will receive an extra £448.60 in take-home pay.
Employer NICs remained unchanged.
Income Tax: No Changes to Rates or Bands
Despite strong rumours beforehand, there was no change to the rates of income tax, bands, or the personal allowance in The Budget. Due to ‘fiscal drag’ (where pay rises with inflation but tax thresholds don’t keep up), this effectively cancels the effects of the tax cuts announced.
Changes to the High-Income Child Benefit Charge
The high-income child benefit charge (HICBC) rule means child benefit is currently clawed back from families where at least one parent earns over £50,000. The rules are seen as unfair because they apply based on individual, rather than household, income. From April 2026 the HICBC will apply on a household basis. In the meantime, from 6 April 2024, the HICBC threshold will be increased to £60,000, and the 100% clawback only applies when the higher earner’s income is £80,000 or more, a welcome relief for many parents.
Corporation Tax Remains Largely Unchanged
For companies, there is no change to the main Corporation Tax rate of 25%, and no changes to R&D reliefs. The widely anticipated capital allowances extension to full expensing for leasing (as well as buying) assets is welcome news, but is subject to further consultation.
VAT Threshold Increase
Small businesses will see some relief as the VAT registration threshold rises from £85,000 to £90,000 on April 1st 2024 (the first increase in seven years). This means around 28,000 businesses will no longer have to pay VAT. Additionally, the de-registration threshold increases to £88,000.
Recovery Loan Scheme Extended
The extension of the Recovery Loan Scheme, now known as the Growth Guarantee Scheme, until March 31st, 2026, is a lifeline for many SMEs. With the aim of assisting 11,000 businesses, this extension provides continued access to vital funding, supporting recovery efforts and promoting economic stability.
AI Funding For Small Businesses
The pilot of a £7.4 million fund to help SMEs develop AI skills demonstrates the
government’ s commitment to fostering innovation and competitiveness in the digital age. By equipping businesses with the necessary resources and expertise, this initiative drives technological advancement and boosts productivity. It will be interesting to see how this is implemented in practice.
CGT Residential Property Rate Change
Individuals who dispose of a residential property which isn’t their main residence currently pay tax on any gain at 28% at the higher rate, and 18% at the basic rate. From 6 April 2024, the higher rate is to be reduced to 24% (the basic rate remains unchanged), meaning that it may be better to defer taxable sales if you are a higher-rate tax payer.
Furnished Holiday Lettings Tax Overhaul
The furnished holiday lettings rules are to be abolished from April 2025. As this regime gives tax breaks to landlords who let out property on a short-term basis, its abolition must be intended to encourage lettings to longer-term tenants. This is a major change for holiday letting businesses.
Regulating Tax Advisers
With the intention of improving the quality of tax advice to clients, making improvements to tax compliance and generating greater trust in the tax system, the Government has published a consultation on raising standards in the tax advice market. By requiring advisers to join professional bodies and register with HMRC, these measures promote accountability and integrity in tax advisory services, ultimately affecting UK businesses. We welcome this move, and we are of course already members of a prestigious professional body: the Institute of Chartered Accountants in England and Wales (ICAEW).
Non-Dom Rules Abolished
The current rules enable non-UK domiciled individuals living in the UK to avoid UK tax by keeping overseas income and gains offshore. From April 2025 onwards, non-doms will be taxed on worldwide income and gains in the same way as any other UK resident (after the first 4 years). Transitional measures will ease the change for existing non-doms.
