Spring Budget prioritises vote-winning measures with SMEs left behind, says Milsted Langdon
Released On 13th Mar 2024
Following Chancellor Jeremy Hunt’s Spring Budget, South West-based accountancy firm, Milsted Langdon cautions that Mr Hunt has targeted individuals with tax cuts, at the expense of small businesses.
Outlining his ‘Budget for long-term growth’, the Chancellor placed a heavy emphasis on relieving the financial burden on families and working individuals following a period of high living costs and inflation.
The headline tax cut of two per cent on employee National Insurance Contributions, set to fall to eight per cent for employees and six per cent for the self-employed from 6 April 2024, formed the basis of this approach.
“A further cut in National Insurance is clearly going to be welcomed by working people,” said Rob Chedzoy, Tax Partner at Milsted Langdon. “But, as we saw with the Autumn Statement, employers continue to be left behind. While a lower rate of National Insurance is great for individuals, there was no such relief for hard pressed employers.”
Even the most significant measure for SMEs, the announced rise in the threshold at which businesses and sole traders must register to pay VAT from £85,000 to £90,000, is unlikely to have any benefit for most businesses.
“This is the first rise in seven years, which means that the registration threshold is lagging well behind inflation”.
Beyond changes to the VAT threshold, Milsted Langdon warned that other measures unveiled in the Budget, revealed a ‘voter-first’ approach to this Budget.
In a bid to assuage concerns over the fairness of the High Income Child Benefit Charge, a threshold increase to £60,000 was announced, alongside a promise to overhaul the system to a household basis by 2026. Overall, the government estimates that 485,000 families will gain an average of £1,260 towards the costs of raising their children in 2024/25 and 170,000 families will be taken out of paying the tax charge.
The Chancellor’s leading measures revealed a “person-centred approach to the Budget which reflects the fact that businesses cannot vote”, says Milsted Langdon.
“However, it’s important to note that businesses were not neglected entirely and have been the primary beneficiaries of a number of recent Budgets and Statements.”
In particular, said Milsted Langdon, the Chancellor announced reliefs for film and television production, arts and performance – with new tax credits for independent UK films, and the permanent introduction of tax reliefs for touring and non-touring performing arts.
This came in addition to some limited support for the hospitality sector – including another freeze on alcohol duty until February 2025.
The Budget also carried potential future benefits for businesses with high plant and machinery costs, with Full Expensing capital allowances to be extended to leased assets “when fiscal conditions allow”.
At present, this relief does not apply to hire companies that lease their machinery to end-users, which is the model for many businesses in the construction industry. When implemented, this measure should stimulate new investment for companies in this sector.
“Despite this, while there were plenty of measures in the Budget designed for growth and getting the UK to the forefront of certain industries, we can see that there wasn’t enough support for small businesses as a whole.
“Outside of specific industries, those measures just weren’t there in sufficient quantity. The Treasury’s priorities are currently elsewhere, and businesses will need to proceed with caution as new economic measures target support at individuals prior to a general election.”
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