Marked by economic challenges and the buzz of an impending general election, Chancellor Jeremy Hunt’s Spring Budget was highly anticipated. Presented on 6 March, the Budget aimed to strike a delicate balance between prudent financial management and appealing to voters, with a keen eye on fostering long-term growth.
This blog offers a closer look at the key announcements from the Chancellor’s speech, providing insights into how these changes may affect you and your business.
National Insurance adjustments
A notable highlight was the further reduction in National Insurance Contributions (NICs). For employees, the primary rate has been cut by an additional 2%, bringing it down from 10% to 8% in April. Coupled with the previous reduction in January, this equates to a substantial tax relief of more than £900 for the average employee earning £35,400.
Self-employed individuals will also benefit from a 2% reduction in the main rate of Class 4 NICs, dropping from 8% to 6%. This adjustment, alongside the removal of the Class 2 NICs requirement announced previously, means the average self-employed person making £28,000 could see savings of over £650 a year.
Raising the VAT registration threshold
From 1 April 2024, the threshold for VAT registration will increase from £85,000 to £90,000.
The upcoming threshold rise has the potential to reduce VAT-related responsibilities for an estimated 28,000 small and medium enterprises (SMEs) and encourage investment and growth by simplifying regulatory demands.
Elimination of furnished holiday lettings (FHL) relief
Scheduled for April 2025, the decision to abolish furnished holiday lettings relief aims to alleviate housing shortages in popular tourist destinations by reducing the incentives for short-term holiday lets.
Introduction of the growth guarantee scheme
The growth guarantee scheme represents an evolution and expansion of the recovery loan scheme, specifically designed to assist SMEs in securing the finance they need to thrive.
Revising non-dom status
The Chancellor has proposed a modernisation of the non-dom tax regime, introducing an improved system that exempts new residents from tax on foreign income for their first four years in the UK. After this period, non-doms will be subject to the same tax rates as all UK residents, aiming to raise £2.7 billion a year by 2028/29 without deterring investment.
Savings and investments
The Budget also introduces initiatives to encourage pensions and savings. The new UK ISA will allow for an additional £5,000 annual investment in UK equities, free of tax. The launch of British Savings Bonds, offering a guaranteed rate for three years, is designed to offer more appealing returns to savers.
Support for businesses
While the Autumn Statement had a stronger pro-business emphasis, the Spring Budget still included several measures aimed at supporting SMEs, high-growth firms, and key sectors like manufacturing, the creative industries, and life sciences through the Growth Guarantee Scheme.
Elimination of furnished holiday lettings (FHL) relief
Scheduled for April 2025, this decision to abolish furnished holiday lettings relief aims to alleviate housing shortages in popular tourist destinations by reducing the incentives for short-term holiday lets.
Implications for the property market
The phasing out of FHL relief could significantly affect the property market, particularly in areas popular for short-term rentals, by promoting long-term rentals over short-term lets. Conversely, the reduction in the higher rate of capital gains tax (CGT) on residential properties from 28% to 24% starting in April 2024 is poised to stimulate the housing market.
Rounding off
Chancellor Jeremy Hunt’s Spring Budget outlines the Government’s strategy to confront current economic challenges head-on. By lightening the tax load on both individuals and businesses, revising the non-dom regime, and encouraging savings and investments, the Budget aims to build a more dynamic, equitable, and flourishing economy.
Staying informed and adjusting your financial planning accordingly is advisable. As always, Wells Associates is here to help you navigate these changes and support you and your business during these times.
Reach out to discuss how these updates impact your finances.