Spring Budget garners mixed reactions

Mar 13, 2024

In the 2024 Spring Budget, Chancellor Jeremy Hunt outlined a series of measures aimed at both bolstering UK businesses and alleviating the tax load on households, without springing any major surprises on the business front.

 

Business

For businesses, the Chancellor's strategy includes a five-year support package that boosts investment in manufacturing and research and development-intensive sectors, complemented by £1 billion in tax relief targeted at the creative industries.

To aid small and medium-sized enterprises (SMEs) in securing necessary funding, the Recovery Loan Scheme, now rebranded as the Growth Guarantee Scheme, will support approximately 11,000 SMEs.

In efforts to ease the strain on smaller businesses, from April, the VAT registration threshold will see an increase from £85,000 to £90,000, with this adjustment fixed until April 2026. Additionally, the Budget announced the cessation of the furnished holiday lettings tax relief from April 2025 and the multiple dwellings relief from June, measures that the Office for Budget Responsibility (OBR) suggests will save the Treasury around £245 million and £385m annually, respectively.

 

Personal

Turning to personal taxation, after the implementation of a 2p cut to National Insurance contributions (NICs) in January 2024, Hunt declared an additional 2p reduction set for April, aiming to lessen the financial burden on taxpayers.
This decision likely stemmed from economic considerations, as reducing income tax by 1% would have entailed a £7bn cost, compared to the £4.5bn expense of the NIC cut.

A significant policy shift includes the abolition of the non-dom tax status, effective from April 2025. New arrivals to the UK will initially enjoy a four-year period exempt from tax on foreign income, after which they will be taxed in line with UK residents.

The Chancellor also intends to revise the high-income child benefit charge to a more equitable household-based system by April 2026. In the interim, the income threshold for this charge will increase from £50,000 to £60,000 starting April 2024, relieving 170,000 families of this financial obligation.

Lastly, the Budget proposes to reduce the higher capital gains tax rate (CGT) on residential properties from 28% to 24%, a move Hunt believes will stimulate more property transactions and, consequently, increase tax revenues.

Through these varied measures, spanning from support for business investment and easing operational burdens to targeted tax reductions and simplifications for individuals, the Chancellor aimed to stimulate growth, innovation, and financial relief across the UK's economic landscape.

 

Reactions

Reactions to the announcements were mixed.

Dr Roger Barker, director of policy at the Institute of Directors, said:

"First and foremost, business was hoping for a Budget that would maintain a stable and credible policy framework for business. The Chancellor largely delivered that.

"However, beyond that, there was little in the announcements that can be regarded as a game-changer for business. Rather than addressing the UK's longer-term economic issues, it fell short of delivering a comprehensive plan for sustainable growth and investment."

Commenting on how the measures will impact small firms, policy chair at the Federation of Small Businesses, Tina McKenzie, said:

"We welcome today's increase in the VAT threshold as well as the cut to self-employed National Insurance Contributions. Elsewhere, we were pleased to see a package of small business support in the Budget documents.

"That said, many of those running businesses face serious challenges - not least through rapid hikes in labour and input costs - and many will have understandably hoped that there would be more measures announced today that would help ease the tough decisions small employers are having to make day-in, day-out to keep their businesses going."

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