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Updated: 8 July 2024
In his last Budget before the General Election, which is expected to take place in the autumn, Chancellor Jeremy Hunt focused on growth through lower taxes and more investment.
Coining the Spring Budget, which was announced on Wednesday 6th March, “a budget for long-term growth”, Mr Hunt announced personal tax cuts, as well as tax breaks and investment for small businesses.
Here we take a look at six key announcements for small businesses in the Chancellor’s Spring Budget1, and explain how these will affect businesses in the months to come.
According to figures from the Office for Budget Responsibility (OBR)2, inflation is set to fall further and faster than expected, reaching its 2% target in the next few months. This is nearly a year earlier than forecast.
In addition, the OBR is forecasting growth of 0.8% this year, followed by growth of 1.9% next year, which is higher than previously expected.
Following the announcement of permanent full expensing in the Autumn Statement, this has been extended to leased assets “as soon as is affordable”.
Full expensing allows businesses to deduct the full cost of capital equipment from their profits in the year it was purchased. Draft legislation to extend full expensing to leased assets will be published shortly.
Mr Hunt pledged £200 million of funding to extend the Government’s Recovery Loan Scheme, which has been renamed the Growth Guarantee Scheme and extended until March 2026. This will help 11,000 SMEs across Great Britain and Northern Ireland access the finance they need.
To help small businesses mitigate the administrative and financial burden of VAT, the VAT registration threshold will be increased from £85,000 to £90,000. This will come into place from 1st April 2024.
In a boost to the hospitality industry, the freeze on alcohol duty has been extended until February 2025. This will cut costs for 38,000 pubs across the UK, as well as breweries, distilleries, bars, restaurants and nightclubs.
The 5p cut to fuel duty that was introduced in 2022 has been frozen at its current level and extended for another year. This will be a relief for businesses that have a fleet of vehicles or sole traders who depend on transport for work.
After announcing a cut to National Insurance Contributions (NICs) in his Autumn Statement, the Chancellor went one step further with an additional 2p cut in National Insurance.
For the self-employed with profits above £12,750, the main rate of Class 4 NICs has been cut from 9% to 6% as of 6th April 2024.
In addition to the abolition of the requirement to pay Class 2 NICs, announced in last year’s Autumn Statement, this represents a saving of around £650 a year for the average self-employed person earning £28,000.
This was a hopeful Budget, ahead of the General Election, with Mr Hunt saying “As growth returns our plan is for economic growth… that raises wages and living standard for families.”
While a focus on investment, particularly for SMEs, and cut in taxes will be welcomed by many small business owners, we will have to wait to see the impact that these measures have on the UK economy and business.
If your business is interested in finance to help you grow, you can apply for a loan or line of credit in minutes. Check if you’re eligible today on our website.
06/03/24: While we want to help as much as we can, the information found here is provided solely for informational purposes and should not be considered financial or legal advice. To the extent permitted by law, Funding Circle does not accept any liability for any loss or damage which may arise directly or indirectly from the use of, or reliance on, the information contained here. If you have any questions, please speak to your professional adviser or seek independent legal advice.
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