Last month’s Spring Budget set out the Government’s latest plans for the economy, including changes to taxation and spending. These measures will impact both businesses and individuals. This article looks at some of the main points set out in the Budget and their likely impact on small and medium businesses (SMEs).
What is the Budget?
The Budget is an annual statement made by the Chancellor of the Exchequer to MPs in the House of Commons. It sets out the Government’s plans for the economy including changes to taxation and public spending.
The Chancellor is the Government’s chief finance minister. After the Chancellor announces the Budget, MPs may make immediate changes depending on the contents of the statement. Following further discussion and debate, a Finance Bill is introduced which gives permanent legal power to the Budget’s proposals.
Spring Budget 2024 – five key points for SMEs
1. VAT
Value Added Tax (aka VAT) is a tax added to most products and services sold by VAT-registered businesses. In order to pay VAT to the Government, most businesses pass the VAT on to their customers. This results in an increase in the end price payable by the customer. The Budget proposes an increase in the VAT registration threshold from a taxable turnover of £85,000 to £90,000. Based on current figures, this means approximately 28,000 SMEs will no longer have to pay VAT. However, with the cost of living rising, many businesses are having to increase their prices to cover the increased cost of materials, energy and labour etc. This is likely to increase a business’ turnover, pushing it above the newly increased VAT-registration threshold.
2. Growth Guarantee Scheme
The Government’s Recovery Loan Scheme (RLS) is to be extended by £200million and will be called the Growth Guarantee Scheme. The RLS has supported SMEs access finance to grow and invest. This scheme is due to end on 30 June 2024. Its successor, the Growth Guarantee Scheme, will come in to operation on 1st July 2024. It is anticipated that the additional funds will help 11,000 small businesses to access the finance they need. Financial analysis is suggesting this is not a significant departure from the last 18 months. However, it is still positive as it will allow lenders to lend, and therefore businesses to borrow, where they might not otherwise have been able to.
3. Fuel duty freeze
Fuel duty is a flat rate levy which is included in the cost of petrol, diesel and other fuel at the pump. It is currently set at 53p a litre and this represents a significant source of revenue for the Government. This duty has been frozen for over 10 years and the Spring Budget extended this freeze for another year. Interestingly though, VAT is charged not just on the fuel price but also on the duty.
4. Property Capital Gains Tax (CGT)
CGT is a tax on the profit when you sell, giveaway or otherwise dispose of something (an ‘asset’) that has increased in value. The rate of CGT that you pay when disposing of a property that isn’t your main home (for example, a buy-to-let property or second home) will depend on how much income tax you pay. The Spring Budget reduces the higher rate of CGT on residential properties from 28% to 24%, which will benefit landlords.
5. Creative arts business investment
Proposals include:
- introduction of a 40% relief on gross business rates in force until 2034 for eligible film studios;
- a new tax credit for independent British films with a budget of less than £15 million;
- a permanent 45% tax relief for touring productions;
- 40% relief for non-touring productions.
These measures will benefit orchestras, museums, galleries and theatres.
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This article does not constitute legal advice. We do not advise on tax. If you would like to discuss your businesses legal needs, please contact us at:
e: info@bailoran.com w: https://bailoransolicitors.com/ t: 0113 266 0735.