Spring Budget highlights

Mar 11, 2024 | Budget report

Due to the recent economic downturn and the anticipation of an upcoming general election, Chancellor Jeremy Hunt’s Spring Budget was set against high expectations.

Delivered on 6 March, it aimed to balance sound financial judgement with generosity, focusing on stimulating long-term growth. This blog post unpacks the major announcements from the Chancellor’s address, offering insights into the changes.

Key measures

  • VAT registration threshold increase: The threshold is rising from £85,000 to £90,000, effective 1 April 2024, to alleviate the administrative and financial burdens on SMEs.
  • Furnished holiday lettings (FHL) relief abolition: Set for April 2025, this measure aims to address housing shortages in coastal and tourist areas by discouraging short-term holiday lets.
  • Growth guarantee scheme: The Government is renaming and extending the recovery loan scheme to support SMEs in accessing necessary finance.
  • National Insurance: The main rates of National Insurance were cut by a further 2% for employees and self-employed individuals.

NI adjustments

A standout feature of the Budget was the further reduction in National Insurance Contributions (NICs). For employees, the main rate saw another 2% point decrease, moving from 10% to 8% in April. When combined with previous cuts, this represents a one-third reduction in employee NICs within just half a year, translating into a significant tax cut of over £900 for the average worker earning £35,400.

The Budget also included a NI reduction for the self-employed. The main rate of Class 4 NICs will drop by an additional 2%, from 8% to 6%. Coupled with the elimination of Class 2 NICs requirements announced in the Autumn Statement, the average self-employed person earning £28,000 stands to save over £650 annually.

Rethinking non-dom status

Addressing criticisms of the non-dom system, the Chancellor unveiled plans to overhaul this “outdated” tax regime. The new framework promises no tax on foreign income for new arrivals during their first four years in the UK, after which they will transition to the standard tax rates applicable to all residents.

This reform is projected to generate £2.7 billion a year by 2028/29 without discouraging investment.

Savings and investments

The Spring Budget also introduced measures to boost pensions and savings. A new British ISA will allow individuals to invest an additional £5,000 annually in UK equities, free of tax. Meanwhile, the introduction of British Savings Bonds, offering a guaranteed rate for three years, aims to provide savers with more attractive returns.

Business support

Despite being less focused on pro-business announcements compared to the Autumn Statement, the Spring Budget did not overlook the needs of SMEs, high-growth entities, and crucial sectors like manufacturing, creative industries, and life sciences.

The extension of the Recovery Loan Scheme, now named the ‘Growth Guarantee Scheme‘ is also a significant support measure for smaller firms.

Small businesses

The VAT registration threshold has increased from £85,000 to £90,000. This rise may be particularly beneficial for small businesses, potentially reducing VAT-related obligations for around 28,000 SMEs.  The change is also expected to stimulate investment and growth by easing regulatory burdens.

Property market

The abolition of furnished holiday lettings (FHL) relief represents a significant shift in the property market, especially in areas affected by short-term rentals. This move aims to rebalance the housing market in favour of long-term rentals, benefiting local communities. However, it may negatively impact property owners who rely on short-term lets as an income source.

On the other hand, a reduction in the higher rate of capital gains tax (CGT) on residential properties from 28% to 24% starting April 2024 is expected to invigorate the housing market.

Seeking expert advice can help you manage these changes.

Wrapping up

The Chancellor’s Spring Budget has laid down a strategy aimed at addressing immediate economic challenges. By easing the tax burden on individuals and businesses, reforming the non-dom regime, and incentivising savings and investment, the Budget seeks to create a more dynamic, fair, and prosperous economy.

You should stay informed and possibly adjust your financial planning to align with these changes. As always, Accountants at Langdowns DFK can help you stay on top of your finances and provide support while you and your business adapt to these announcements.

Talk to us about these changes.

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