In his final Budget before the General Election, Chancellor Jeremy Hunt returned to the traditional Conservative economic pillars: lower taxes and higher growth.
A swashbuckling Kwasi Kwarteng-style ‘tax-cutting event’ it certainly was not. But Jeremy Hunt’s pre-election Budget did pull the Tories back into a more familiar economic orbit: lower taxes, a focus on growth and talk of ‘public sector productivity’.
Compared to last year’s fairly tame speech, this year’s address gave UK business owners much more to chew on. The looming election, no doubt, played a big role in the Chancellor’s decision to dial up his economic pitch to businesses and voters.
Let’s take a look at the major headlines for UK small businesses.
As such, the Chancellor’s announcement of a cut to National Insurance contributions (NICs) for employees was Westminster’s worst-kept secret for weeks. So while it wasn’t a shock, we did finally get to hear the news straight from Jeremy Hunt.
As briefed more or less everywhere pre-Budget, the Chancellor announced that the NI contribution rate will be cut from 10% to 8% of pay from April. This follows on from his Autumn Statement last year, where he cut the rate from 12% to 10%.
Before the Budget, the Chancellor spoke often about incentivising people to return to work. The cut in NICs is a big part of this. The 2p cut to National Insurance is expected to yield around £450 a year for a worker earning £35,000. But while workers enjoyed a reduction, their employers did not.
In his speech, Hunt seemed unworried by concerns about how this cut in taxation would be funded. He insisted that the cuts to NICs were “permanent” thanks to “progress we've made [on] delivering the Prime Minister's economic priorities”.
For some employers, the change will be a headache. Commenting on the General Business Forum, Newchodge noted the “Inconvenience of having to make another NI change by 7 April, when my first payroll of the new tax year is due.”
The full expensing allowance means companies get up to a 25% in-year tax deduction for capital expenditure. And now, full expensing will be broadened to leased assets (like computers, cars, trucks and factory machinery).
Draft legislation is expected in due course – and the Chancellor said he expected the policy to happen “when fiscal conditions allow”.
In other big news for SMEs, an increase in the VAT registration threshold from £85,000 to £90,000 was also announced. This increase will take around 28,000 small businesses out of paying VAT altogether.
This is down from 4% in January. “Nearly a whole year earlier than forecast in the Autumn Statement,” the Chancellor added.
For Britons, it’s a long way from the eye-watering 11.1% inflation rate inherited by Hunt and Rishi Sunak when they took over from Liz Truss in 2022. In general, inflation in food and energy prices has mercifully eased.
But while the UK’s economy is back on a growth track, it’s still some way off the annual GDP growth rate of 2%-3% considered normal for a developed economy. It’s growth, certainly, but not a strong sign that the UK’s economy is prospering.
The OBR’s projections predict that the economy will grow by 0.2% in the first three months of 2024. Overall, the economy is set to expand by 0.8% in 2024, slightly higher than November’s prediction of 0.7%.
The good news is that growth is expected to rebound further in 2025 to 1.9% and 2% in 2026.
Non-dom tax status refers to individuals who live in the UK but whose permanent abode is abroad. Under current law, these people only pay tax on income earned in the UK. Income and wealth from outside the UK are untouched.
Non-dom tax status has been a poisoned chalice for this Prime Minister. His wife’s tax affairs and non-dom status have repeatedly garnered him negative headlines.
In general, the Conservatives have steered clear of talking about non-dom taxes – or have defended it. So Jeremy Hunt’s announcement is an about-face. Indeed, it’s a clever bit of political manoeuvring: abolishing non-dom was one of Keir Starmer’s key fiscal pledges.
The plan is for a “modern, simpler and fairer” system from April 2025. Non-dom status will come with a time limit. After four years in the UK, an individual will pay the same taxes as other UK residents.
According to the Chancellor, the plan would raise £2.7bn a year overall.
UKBF member Mark James perfectly summarised the transient mood among business owners, wryly noting that all of Hunt’s proposals could “be scrapped if there is a government change”.
Overall, the reaction on the Forum was muted. Answering the question of whether the Budget would help him, Paul Kelly lamented: “Sadly, not at all.”
He added, “Any savings to consumers are negligible and VAT change will affect only a handful of businesses.” Another UKBF member, IanSuth, offered a more succinct analysis of the Budget’s value to small businesses: “Zip, zero, nothing.”
Did anything from the Spring Budget 2024 stand out for you? Or are you carrying on as before? Let us know in the comments below and join the discussion.
A swashbuckling Kwasi Kwarteng-style ‘tax-cutting event’ it certainly was not. But Jeremy Hunt’s pre-election Budget did pull the Tories back into a more familiar economic orbit: lower taxes, a focus on growth and talk of ‘public sector productivity’.
Compared to last year’s fairly tame speech, this year’s address gave UK business owners much more to chew on. The looming election, no doubt, played a big role in the Chancellor’s decision to dial up his economic pitch to businesses and voters.
Let’s take a look at the major headlines for UK small businesses.
National Insurance cuts for workers (but not employers)
For some time now, Budgets have lacked an element of surprise. Mostly due to Whitehall seemingly having more leaks than a wicker canoe.As such, the Chancellor’s announcement of a cut to National Insurance contributions (NICs) for employees was Westminster’s worst-kept secret for weeks. So while it wasn’t a shock, we did finally get to hear the news straight from Jeremy Hunt.
As briefed more or less everywhere pre-Budget, the Chancellor announced that the NI contribution rate will be cut from 10% to 8% of pay from April. This follows on from his Autumn Statement last year, where he cut the rate from 12% to 10%.
Before the Budget, the Chancellor spoke often about incentivising people to return to work. The cut in NICs is a big part of this. The 2p cut to National Insurance is expected to yield around £450 a year for a worker earning £35,000. But while workers enjoyed a reduction, their employers did not.
In his speech, Hunt seemed unworried by concerns about how this cut in taxation would be funded. He insisted that the cuts to NICs were “permanent” thanks to “progress we've made [on] delivering the Prime Minister's economic priorities”.
For some employers, the change will be a headache. Commenting on the General Business Forum, Newchodge noted the “Inconvenience of having to make another NI change by 7 April, when my first payroll of the new tax year is due.”
Expensing leased assets and VAT threshold
Last autumn, the Chancellor announced that the tax break for businesses investing in plants and machinery – including trucks and vans – would be made permanent.The full expensing allowance means companies get up to a 25% in-year tax deduction for capital expenditure. And now, full expensing will be broadened to leased assets (like computers, cars, trucks and factory machinery).
Draft legislation is expected in due course – and the Chancellor said he expected the policy to happen “when fiscal conditions allow”.
In other big news for SMEs, an increase in the VAT registration threshold from £85,000 to £90,000 was also announced. This increase will take around 28,000 small businesses out of paying VAT altogether.
Inflation
Cutting inflation has been a key focus for the Prime Minister (one of his ‘five priorities’ outlined in 2023). And on that front, it’s good news: the Office for Budget Responsibility (OBR) projects that inflation will fall below the government’s 2% target in “just a few months”, Hunt said.This is down from 4% in January. “Nearly a whole year earlier than forecast in the Autumn Statement,” the Chancellor added.
For Britons, it’s a long way from the eye-watering 11.1% inflation rate inherited by Hunt and Rishi Sunak when they took over from Liz Truss in 2022. In general, inflation in food and energy prices has mercifully eased.
Anaemic growth
Britain’s brief dalliance with recession has officially ended, according to the OBR. The Chancellor was no doubt relieved to get past the gloom of last year.But while the UK’s economy is back on a growth track, it’s still some way off the annual GDP growth rate of 2%-3% considered normal for a developed economy. It’s growth, certainly, but not a strong sign that the UK’s economy is prospering.
The OBR’s projections predict that the economy will grow by 0.2% in the first three months of 2024. Overall, the economy is set to expand by 0.8% in 2024, slightly higher than November’s prediction of 0.7%.
The good news is that growth is expected to rebound further in 2025 to 1.9% and 2% in 2026.
Scrapping non-dom tax status
In perhaps the clearest bit of electioneering in this year’s Budget, the Chancellor announced the abolition of non-dom tax status.Non-dom tax status refers to individuals who live in the UK but whose permanent abode is abroad. Under current law, these people only pay tax on income earned in the UK. Income and wealth from outside the UK are untouched.
Non-dom tax status has been a poisoned chalice for this Prime Minister. His wife’s tax affairs and non-dom status have repeatedly garnered him negative headlines.
In general, the Conservatives have steered clear of talking about non-dom taxes – or have defended it. So Jeremy Hunt’s announcement is an about-face. Indeed, it’s a clever bit of political manoeuvring: abolishing non-dom was one of Keir Starmer’s key fiscal pledges.
The plan is for a “modern, simpler and fairer” system from April 2025. Non-dom status will come with a time limit. After four years in the UK, an individual will pay the same taxes as other UK residents.
According to the Chancellor, the plan would raise £2.7bn a year overall.
Election 2024 ’round the corner
Of course, all of Hunt’s well-made plans could be for nothing. Labour retains a daunting lead in the polls, and the longest that Rishi Sunak could delay an electoral reckoning is until January 2025 (but it’s likely to be sooner than this, perhaps even May).UKBF member Mark James perfectly summarised the transient mood among business owners, wryly noting that all of Hunt’s proposals could “be scrapped if there is a government change”.
Overall, the reaction on the Forum was muted. Answering the question of whether the Budget would help him, Paul Kelly lamented: “Sadly, not at all.”
He added, “Any savings to consumers are negligible and VAT change will affect only a handful of businesses.” Another UKBF member, IanSuth, offered a more succinct analysis of the Budget’s value to small businesses: “Zip, zero, nothing.”
Did anything from the Spring Budget 2024 stand out for you? Or are you carrying on as before? Let us know in the comments below and join the discussion.
