Chancellor Jeremy Hunt recently unveiled the 2024 UK Spring Budget, which comes with a mix of both expected reforms and some surprises. Overall, it comes with good news for both individuals and small businesses, including a highly welcome child benefit reform.
But there are certain highlights of the UK Spring Budget that need to be discussed. In this piece, we will do just that. We will also list everything that UK taxpayers should keep in mind going forward.
Overall economic outlook: Budget highlights for taxpayers
According to the chancellor, UK inflation is more or less under control, with price rises set to come down to under 2% within the next few months.
GDP is projected to go up 0.8% this year, with rises of 1.9% and 2.2% in 2025 and 2026 respectively. Borrowing will also reduce to its lowest level since 2001 by 2028-2029, to 1.2%.
NICs cut further
While there had been rumours of a reduction in personal income tax, the UK Spring Budget instead announced a second reduction in NICs for employees and self-employed individuals.
Employee Class 1 NICs will reduce from 10% to 8%, while self-employed Class 4 NICs will drop from 8% to 6%. The change is alleged to save both categories of taxpayers several hundred pounds per year.
However, this does not factor in the frozen tax thresholds, which will actually end up increasing the tax burden for the lowest and highest categories of taxpayers.
British Individual Savings Account (ISA)
To encourage more investment in UK businesses, the government announced a British ISA that will give individuals a tax-free allowance of £5,000 a year to invest in UK-listed companies. This will be in addition to the current allowance of £20,000.
CGT reduced for landlords
One surprise move was the reduction of the top rate of Capital Gains Tax (CGT) from 28% to 24% when selling second homes.
Two other reliefs designed for landlords will be scrapped. From June, the multiple dwellings relief will go.
And from April 2025, the furnished holiday lettings tax regime will be abolished. This will have the effect of removing the tax advantage which was available for landlords who let out short-term furnished holiday properties and bring them in line with those using their properties for longer-term tenants. This will have quite an impact on those affected landlords.
Non-dom tax status
As some anticipated, the government announced that from April 2025, non-domiciled UK residents (those with a permanent home outside the UK) will move from the current ‘remittance basis’ of taxation which essentially exempts their foreign income and gains (FIG) from UK taxation unless it was remitted to the UK.
The new residence-based test retains the current regime for four years from 6 April 2025 or the first tax year when they become a UK resident. After this, individuals will be subject to tax on their income and gains irrespective of where they are earned, in the same way UK residents are.
Pension pot for life
This is a proposed plan under which employees will be allowed to ask employers to pay their pension into a plan of their choice, rather than compulsorily having to join the employer’s scheme.
VAT boost for businesses
Small businesses were happy to hear that the compulsory VAT registration threshold would be going up from £85,000 to £90,000 on 1st April, the first such increase in seven years.
Fuel and alcohol duty freeze
In a welcome move, it was announced in the UK Spring Budget that the 5p cut on fuel duty would last until April 2025, while alcohol duty will also be frozen until February 2025.
CGT and dividend allowances slashed
Despite much resistance, the chancellor proceeded with the decision to halve CGT and dividend allowances, bringing them down to £3,000 and £500 respectively from April.
No change on stamp duty or inheritance tax reform
In the UK Spring Budget, the chancellor made no mention of any reforms to inheritance tax, and neither was there any talk about scrapping stamp duty on UK shares, despite its many critics.
Other relevant announcements
- In a welcome announcement for working parents, the high-income child benefit threshold will be increased from £50,000 to £60,000 from April 2024, while the taper will go up from £60,000 to £80,000.
- The Household Support Fund will be extended until September 2024.
In conclusion
The UK Spring Budget is a mixed bag of good and bad news, with the balance tilting overall in favour of UK taxpayers and small businesses. The fuel duty freeze is particularly welcome for those who travel for work, as is the rise in child benefit income threshold.
The British ISA is a positive announcement for individual investors, but the reduction of CGT and dividend allowances means that they will have to tread carefully about where to invest their money to minimise tax burden.
There is also some concern that the scrapping of the furnished holiday lettings scheme might de-incentivise tourism in places that relied heavily on it.
As always, we recommend talking to our expert accountants about exactly what the UK Spring Budget reforms mean for you and how best you can manage your earnings so that you do not lose too much to HMRC.
Sometimes, overspending can hurt your profitability despite your record sales.
Profitability doesn’t only come from sales numbers. Also, a profitable business isn’t always the one with the most customers and the highest sales.
The sign of a business’s profit depends on what’s left in the account at the end of the month or the fiscal year.
It’s important to account not only for the money coming in but also for the money going out. That’s why cutting costs is one of the best ways to boost profitability… assuming that you do it right.
Tip #1 – Address Material Costs
Product sellers are concerned with raw material costs. That’s why increasing profitability can be as simple as lowering manufacturing and or development costs.
You’d be surprised at how much this move can make your business profitable.
Tip #2 – Reduce Labour Costs
Can automation system replace something in your business?
Have you considered hiring a Voice Assistant as opposed to an on-site assistant?
Reducing money spent on wages can also boost profitability. So, evaluate the daily tasks that your team members perform and look at some of your own duties as a business owner.
Outsourcing is one of the best ways to cut costs. It’s also one of the smarter ways to hire as you may have access to a wider pool of experts.
When properly executed, you can lower costs and maintain a high level of quality with outsourcing.
Tip #3 – Manage Expenses
Many businesses are overpaying for marketing.
For example, hotels may work with a variety of travel agencies even though a couple of them may be bringing in the bulk of the bookings.
In that scenario, it may be a good idea to drop the non-performers.
The same principle applies to all other expenses and services. If you pay for things and they don’t end up improving your business or what you offer, these may be expenses worthy of the chopping block.
Tip #4 – Know What Costs to Cut
Most business owners don’t know where to start. If you’re one of them, it’s ideal to start by performing an internal audit of your finances.
Identify where all the money comes and goes and decide what you can or can’t cut.
Tip #5 – Get Better Deals
Many industries work with vendors, which happens to be a great area to look at if you want to boost profitability.
You may already know that it’s possible to renegotiate vendor contracts, though it’s easy to be put on the back burner. Getting better deals, however, doesn’t always have to involve other vendors, as you can also leverage your relationships with existing vendors.
You can even consider changing service providers and utility contracts.
