Please note that this article is intended for educational purposes only and should not be deemed to be or used as legal, employment, or health & safety advice. For guidance or advice specific to your business, consult with a qualified professional.
Chancellor of the Exchequer Jeremy Hunt unveiled the contents of his famous red briefcase on 6 March 2024, announcing a budget that focused on “long-term growth”.
Despite the UK currently being in a recession, the tone of the budget was optimistic, emphasising inflation falling further and faster than predicted, and announcing tax cuts and investment that may benefit SMEs.
What is the Spring Budget?
Whether it’s announced in spring or autumn, the UK Budget is a financial statement made to the House of Commons by the Chancellor of the Exchequer.
The Spring Budget 2024 set out the Government’s proposals for changes to taxation and public spending as well as proposed “efficiency savings” that will try to ensure that taxpayers’ money is spent productively. It included forecasts for the economy for the next five years (up to and beyond this year’s upcoming election) made by the Office for Budget Responsibility (OBR).
Although it’s on a much larger scale and is funded through a combination of taxation and borrowing, the UK Budget works in a broadly similar way to other types of budgets, such as the one you’ve worked out for your own business. Like a business budget, the national budget aims to invest in areas that will promote economic growth.
How often does the UK government release a Budget update?
The Budget usually happens at least once a year (barring any worldwide pandemics), either in the autumn or the spring. It’s one of two annual statements from the Chancellor of the Exchequer to the House of Commons, the other being a statement that’s more commonly known as the “mini-budget”.
What are the highlights for businesses in this year’s government’s Spring Budget?
As might be expected in an election year, the 2024 Spring Budget focused heavily on tax cuts and freezes. At the time of writing, Kier Starmer’s Labour Party has not announced that any of the tax cuts announced in the Spring Budget would be repealed if the party were to enter government this year as polling indicates.
Some areas that may affect businesses include:
National Insurance tax cuts
Employee National Insurance will receive a further 2% cut from 10% to 8% in April 2024. Therefore, an employee earning the national average pre-tax salary of £35,400 will receive an annual tax cut of £900 compared to 2023. Class 4 National Insurance contributions for self-employed sole traders will also be cut from 8% to 6% from April 2024.
Capital Gains tax cuts
In an effort to stimulate the residential property market and the businesses that support it, the Chancellor has reduced the higher rate of Capital Gains tax on property from 28% to 24% from April 2024.
Tax relief for high-growth industries
In order to position the UK as a world leader in fast-growing industries, the Chancellor has announced a bevy of new tax reliefs for select industries over the next five years. These include:
- £270 million R&D relief for automotive and aerospace
- A £120 million top-up to the Green Industries Growth Accelerator announced in autumn 2023
- £1 billion in new tax reliefs for the creative industries
Duty tax freezes
Businesses in the transport and logistics sectors will be relieved to learn that fuel duty will, as expected, be frozen again until March 2025. The temporary 5p cut introduced in 2022 will also be extended.
The six-month alcohol duty freeze announced in last year’s autumn statement will also be extended until 1 February 2025.
Extended windfall tax on energy
Energy costs continue to be a cause of major concern among SMEs. As we get further from the market shocks that caused energy prices to spike, energy prices are projected to fall throughout 2024. The Spring Budget included an extension to the Energy Profits Levy to March 2029. This will raise £1.5 billion for the treasury while encouraging investment in the UK’s green energy sector. However, the Government has promised to legislate for the levy to be abolished if market prices fall to historic norms sooner than projected.
Support for small businesses to invest and grow
Prominent in this growth-oriented budget is the announcement of a £200 million extension to the Growth Guarantee Fund, previously known as the Recovery Loan Scheme.
This aims to help 11,000 small businesses to access the finance they need to invest in infrastructure and fund their growth.
VAT has previously been a pain point for small businesses, so it may come as some relief that the VAT registration threshold will increase from £85,000 to £90,000 in April 2024. This will alleviate the need for an estimated 28,000 small businesses to pay VAT at all.
While businesses have endured economically tumultuous times over the past few years, this budget does show some promise for SMEs. Moreover, Square is always on hand to help businesses manage cash flow, get paid faster, increase revenues and improve operational efficiency.