Jeremey Hunt announced The Spring Budget on March 6th at 12:30 PM. In this blog we want to explore exactly what has been announced and what that means for SMEs.
This budget builds upon the initiatives outlined in the autumn statement last November, which aimed to fortify British workers and businesses. This spring we have the latest, including reductions in National Insurance rates, Child benefits and the VAT threshold.
Here’s what has been announced:
Content Directory:
- What the Government is Doing for Small Businesses
- An Increase to the VAT Threshold
- National Insurance Contribution Cut
- An increase to the High-Income Child Benefit Charge Threshold
- Alcohol Duty Freeze Continues
- Second Home Owners
- A New British ISA
What the Government is Doing for Small Businesses
The chancellor also announced that the government will help small businesses saying “I’ll provide £200m pounds 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. This is on top of the business rate support and work on prompt payments announced in the autumn”.
Mr Hunt noted, in the Autumn Statement, he unveiled a £10bn tax cut for businesses that make capital investments in the UK, known as “full expensing”. Today, he announced firms will be able to claim tax relief for leased assets as well.
In the creative industries, the Chancellor has announced a promising initiative aimed at supporting film studios across England. A generous 40pc relief on gross business rates will be extended to these studios until 2034, offering a significant boost to their financial sustainability. Additionally, exciting plans have been unveiled for a fresh tax credit for independent films with budgets under £15 million.
An Increase to the VAT Threshold
Hunt has announced, The VAT registration threshold is set to increase from £85,000 to £90,000 from April 1st the first increase in 7 years.
Considering the VAT threshold has remained unchanged since April 2017. Currently, at £85,000, many small enterprises limit their turnover to stay below this threshold and avoid VAT registration, potentially hindering their expansion opportunities. This will bring 10s of thousands of businesses out of paying VAT altogether and encourage many more to invest and grow.
National Insurance Contribution Cut
The Chancellor said, “The way we tax income is particularly unfair”, if you get your income from having a job you pay 2 types of tax, national insurance contributions and income tax if you get it from other sources you only pay 1. The result is a complicated system that penalises work instead of encouraging it. The government aims to encourage people to get back into work.
That is why from April the 6th employee national insurance will be cut by another 2p from 10% to 8% And self employed national insurance will be cut from 8% to 6% this means an additional £450 a year for the average employee or £350 for someone who is self employed.
An Increase to the High-Income Child Benefit Charge Threshold
The £50,000 threshold introduced in 2013, requires claimants to repay 1% of their family’s child benefits for every £100 earned above this threshold annually.
Critics have stated that this is unfair, as it means one person earning £60,000 doesn’t receive any child benefit, but a household with two people each earning £50,000 would get the full amount.
The chancellor stated that this system is “confusing” and “unfair” and to end this unfairness it will require a significant reform to the tax system including allowing HMRC to collect household level information. The government will consult on moving the high income child benefit charge to a combined household system to be introduced by April 2026. But because this isn’t a quick fix, from this April, the charge threshold will be raised from £50,000 to £60,000. Meaning no one earning under 60k will pay the charge.
The top of the taper will also increase to £80,000, making the rate at which the benefit recedes slower. It will mean 170,000 more families will now gain the full benefit. The change is expected to benefit half a million families, with an average increase of nearly £1,300.
Alcohol Duty Freeze Continues
Jeremey Hunt announced, the alcohol duty freeze will continue until February 2025
The Chancellor said: “This benefits 38,000 pubs all across the UK – and on top of the £13,000 saving a typical pub will get from the 75 per cent business rates discount I announced in the Autumn.”
“We value our hospitality industry and we are backing the great British pub.”
Alcohol duty typically goes up in line with inflation each year, but last year it was frozen until 2025. It means producers should not have to hike the price of beer, wine and spirits to offset raised levies. Hospitality chiefs have warned any further hike in the duty on beer, wine and cider would force thousands more pubs to close.
Second Home Owners
The tax breaks for second home owners profiting from holiday lets will be eliminated. Currently, landlords are permitted to deduct tax for assets used in short-term rental properties such as furniture.
A New British ISA
Jeremy Hunt said, the government will reform the ISA system to encourage more people to invest in UK assets. After a consultation on it’s implementation, the government will introduce a brand new British ISA which will allow an additional £5000 annual investment for investments in UK equity with all the tax advantages of other ISAs. This is on top of the existing ISA allowances ensuring British savers can benefit from the growth of the most promising UK businesses as well as supporting those businesses with the capital to expand.
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Ahead of the budget there is no greater time to have a business advisor by your side to guide you through changes in the economy. Book a discovery call today to find out how we can help take your business to new heights.
