General

Budget 2024: Key takeaways for business and reaction

Picture by Simon Walker / No 10 Downing Street

By Daniel Face & Sam Pither [email protected]

Published: March 6, 2024 | Updated: 7th March 2024

Jeremy Hunt appeared before MPs today for the Spring Budget, with a 2p cut to the national insurance rate paid by both employees and the self-employed at the heart of his vision.

While interest rates remain high, the chancellor noted that the UK economy has weathered the financial crisis, pandemic, and soaring energy prices amid war in Europe.

He assured the country that inflation should fall below the government’s 2.0 per cent target in just a few months’ time – ‘nearly a whole year earlier than forecast in the autumn statement’ and down from 4.0 per cent in January.

That will come alongside anticipated growth of 0.8 per cent for the national economy in 2024, rising to 1.9 per cent next year and peaking at 2.0 per cent in 2026. Growth is then expected to slow to 1.8 per cent in 2027 and 1.7 per cent in 2028.

Meanwhile, the government is set to boost day-to-day spending by 1.0 per cent in real terms over the next five years.

There was good news for SMEs, too, with the threshold at which companies must register to pay VAT set to rise from £85,000 to £90,000 this April, as well as an extension for the Covid-era government loan scheme for small businesses until March 2026.

And some may benefit from the extension of full expensing, which allows businesses to offset investment in new technology and equipment, to encompass leased assets.

Mr Hunt also pointed to a new tax credit for independent UK films with a budget of less than £15 million, while the previously temporary tax reliefs for touring and orchestral productions will now be made permanent.

On the topic of taxation, a £5,000 UK ISA tax allowance for savers investing in ‘UK-focused’ shares is on the way subject to a consultation.

Property owners will be happy to hear that the higher rate of capital gains tax paid on residential sales has been cut from 28 to 24 per cent – though tax perks for owners of holiday lets were today scrapped along with stamp duty relief for buyers of second homes.

As for the ongoing energy crisis, the chancellor announced another freeze on fuel duty for the coming year and extended the windfall tax on the profits of oil and gas firms to 2029, a leaf from Labour’s book.

He went on to allocate £120 million for the country’s green energy sector, including offshore windfarms and carbon capture and storage projects, but with a particular focus on nuclear.

***

Business and organisations around Dorset have been reacting to the news.

David Chismon, Partner at Saffery in Bournemouth, said:

The Chancellor seemed to be enjoying his Budget speech and took many opportunities to criticise Labour and the Lib Dems on their tax principles today. The focus for Mr Hunt was to demonstrate that he could cut taxes without increasing borrowing.  

The economics are clearly complicated but the taxation measures he announced are certainly interesting. Many of them will not come as a surprise.  There was the well trailed NIC reduction for employee and self-employed NIC to be reduced from 10% – 8% and from 8% to 6%, respectively. 

The Chancellor also took the opportunity, again it had been hinted at, to announce major changes to the non-domicile regime. This has been a Labour objective, but the Chancellor indicated that they may have taken the idea from Nigel Lawson who apparently wanted to do something similar in 1988!   

This is going to be a major change and will require consultation on various aspects so the scrutinization of the detail by accountants and advice to those affected is going to be crucial. 

It appears that for the first 4 years for UK resident “non-doms” there will be no UK taxation on overseas income and gains but after that all income and gains will be taxed in the UK.  Transitional arrangements will be needed and the Chancellor was at pains to argue this wouldn’t affect inward investment.

There was also changes to the Capital Gains Tax Regime for property owners.  

The highest rate of CGT on residential property is going to be reduced to 24% (from 28%) from 6 April 2024. This may mean that if you are planning to sell a property you will pay CGT on that it is worthwhile waiting, although the CGT annual exemption is also halving to £3,000 per person at the same time, so there will be a point where it is still beneficial to sell in the current tax year.  

In addition, he will be abolishing the status of Furnished Holiday Lets from April 2025, which can have favourable tax status, the rationale Mr Hunt said was to increase supply of longer term lettings.  

Whilst the Chancellor did argue this was a tax reducing Budget, there were no changes to the tax thresholds which means there will be a greater number of people falling into the higher rates of tax as a result of this fiscal drag.  As ever, there will be some winners and some losers in what is going to be the last Budget before the General Election. 

***

Nigel Smith, managing partner at Ellis Jones Solicitors, said:

“It was disappointing that the Chancellor didn’t have more meaningful measures to announce, given that a general election is around the corner.

“With no headline grabbing policy at the end, it felt as if the Chancellor had a hat without a rabbit, although we will wait to see exactly what is in the small print.”

***

Ian Girling, chief executive of Dorset Chamber, said:

The Chancellor’s focus was clearly on fiscal responsibility in the Budget.

“Certainly, some measures will be welcomed by business, including the continued freeze on fuel duty, extension of full expensing for leased assets, tax relief for creative industries and extension of the recovery loan scheme.

“It was encouraging to see movement on the VAT registration threshold from £85,000 to £90,000 but some businesses in Dorset will have felt he could have gone much further.

“There was good news for individuals and families, including further cuts in National Insurance, changes to the child benefit threshold and a new British ISA savings scheme.

“Disappointingly, again there appeared to be little for Dorset when it came to funding for levelling up and regeneration although there may be more in the detail of the Budget.

“A statement of intent on business rates and a commitment to extend Local Skills Improvement Plans (LSIPs) would also have helped to inspire more confidence as we look ahead to the forthcoming general election.”

***

Luke Davis, CEO of Rockwater, comments on Budget’s Alcohol Duty Freeze

The government’s decision to extend the alcohol duty freeze for UK hospitality will be hugely beneficial, and potentially crucial to the sector’s survival.

“Restaurants, pubs, bars, and hotels form part of the social glue that binds communities in towns and cities together.

“It’s been sad to see so many venues close as a result of rising costs, with the number of licensed premises falling below 100,000 for the first time last year. It’s imperative that hospitality businesses are viable today, tomorrow and for years to come so our communities can come together.

“I’m pleased to see that the government has recognised the industry’s importance not only to the identity and culture of our country, but also in driving the economy and employment, which hospitality plays a key role.

“It takes an army of determined and skilled people to deliver the hospitality experience we cherish, and our industry needs the government’s backing to do so.

“I have no doubt that allowing hospitality to thrive will have a landmark effect on the country both economically and socially, which in turn will enable us to serve up the best possible experiences for all.”

***

Lauren Carlyle, Practice Lead for Grant Thornton UK LLP in the South West, said:

“With the economy technically in recession, it was no surprise that today’s budget included a raft of measures to boost growth and incentivise long term investment.

“Smaller firms will appreciate the threshold for VAT registration going up from £85,000 to £90,000. At the other end of the scale, funding for clean energy, AI and innovative tech, as well as childcare support to lower job vacancies, will be welcomed by larger firms for whom these are key issues.

“With the South West renowned for its hospitality sector, it was disappointing not to see any targeted support for pubs, restaurants and nightclubs beyond the freeze in alcohol duty.

“The Chancellor’s permanent cuts in taxation and support for dynamic economies are ambitious, but hopefully will bring positive change to businesses and encourage long-term growth.”

***

Paula Arnold, Senior Associate at Bournemouth law firm Steele Raymond, said:

“In what is almost certain to be an election year, the Chancellor Jeremy Hunt delivered a cautious set of measures in the Spring Budget.  His speech was, in the main, unsurprising, with provisions made to support public services, bolster the UK economy, bring down inflation and promote growth and investment.

“We welcome the reduction of employees National Insurance (NI) to 8% and a similar reduction for the self-employed to 6%, this will help as the country continues to manage the cost-of-living crisis, alongside the interim increase from £50,000 to £60,000 in which parents begin to lose their child benefits – with further reviews promised.

“Significant changes were announced to the non-domicile (individuals who live in the UK, but whose home for tax purposes is overseas) tax rules. Non-doms previously only paid UK tax on money earned in the UK and were not required to pay UK tax on their foreign income unless they chose to bring it into the UK.

“The Government’s intention to create a fairer and more competitive tax system will result in the abolition of the current system for non-doms which will be replaced with a modern residency-based system from April 2025.

“From next year, new arrivals in the UK will not be required to pay any tax on foreign income for the first four years but after then – if they still live in the UK – they will be required to pay the same tax as other UK residents.

“The Government’s intention to remove the concept of domicile may also impact on an individual’s Inheritance Tax position – we wait to see exactly what the outcome here will be.

“No changes made to the frozen income tax thresholds.  In past budgets there would typically be changes to adjusted tax thresholds to keep pace with inflation.  However, income tax thresholds have remained stagnant for several years, thus creating fiscal drag. This means that as salaries increase, a greater proportion may be subject to taxation.”

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