Vote-winning measures took the top spot in the Spring Budget, says Grunberg & Co as Chancellor Jeremy Hunt delivers his ‘Budget for long-term growth’.
The headline measure for businesses, a rise in the threshold at which businesses and sole traders must register to pay VAT from £85,000 to £90,000, while beneficial, still suffered from widespread fiscal drag.
Although it will push many SMEs back below the threshold and represent a significant saving, it is the first change in seven years to the VAT threshold, which substantially reduces the overall benefit to businesses.
Additionally, as widely predicted, Mr Hunt again reduced the main rate of employee and self-employed National Insurance to eight and six per cent respectively from 6 April 2024.
In a bid to avoid a tax shortfall, the Chancellor also announced the transition towards a residency-based tax system – essentially abolishing the ‘non-dom’ status that allows non-UK domiciled individuals to avoid tax on foreign income and gains if they have been a UK resident for less than 15 out of the previous 20 tax years.
This has been replaced with a system which will require, from April 2025, those coming to live in the UK to pay tax on foreign income and gains after four years.
“This was very much a Budget for individuals,” said Nimesh Patel, Tax Partner at Grunberg & Co. “There’s a general election coming up, so it’s unsurprising that many of the measures announced by the Chancellor prioritise the financial wellbeing of the people.”
In particular, the firm highlighted the heavy emphasis on the High Income Child Benefit Charge, which saw its threshold increase from £50,000 to £60,000, in addition to plans to move the Charge to a household model and reduce the burden on families with high income disparity.
“It is excellent to see individuals benefitting from this Budget through enhanced public services spending and tax reductions,” said Nimesh.
“However, considering recent high inflation, it would have been great to see further measures to support SMEs and businesses outside of high-growth sectors which have long been targeted by the Chancellor.
“Beyond the new VAT measure, businesses, particularly those which are small and independent, may well benefit from nominally ‘voter-oriented’ policies,” said Nimesh, citing the fuel duty freeze as a prominent example.
Additionally, the ‘back to work’ thread running throughout the Chancellor’s statement will invariably have a positive impact on growing businesses looking to take on additional staff.
“We also saw tax reliefs and investment for performing arts and film and television production, as well as a freeze in alcohol duty, which will be highly welcomed by those within these sectors.
“The eventual extension of Full Expensing to leased assets may do more for more, but this has no date attached to it and will come in ‘when fiscal conditions allow’.”
“While we welcome measures which support high-growth sectors in the UK, we would also like to see ongoing support for all SMEs, particularly in the realms of National Insurance costs and rates.
“This was not a negative Budget for SMEs, rather it highlighted pre-election priorities which naturally target individuals.
“What we now urge business owners to do is proceed with caution as it is evident that The Treasury’s attention is on the needs of individuals through tax cuts and reliefs.”
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