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On Wednesday, after days of leaks and speculation, Chancellor Jeremy Hunt unveiled the 2024 Spring Budget, which sets out the government’s financial agenda. Dubbed a ‘Budget for Long Term Growth’, the Chancellor claims his latest announcement focuses on delivering lower taxes, more investment, and better public services. The House of Commons set-piece – which may be the government’s final fiscal intervention before a General Election later this year – was dominated by another headline-grabbing 2p cut to employee National Insurance contributions.
Yet while there has already been much discussion of how the 2024 Spring Budget will affect consumers and employees, the Budget also has significant implications for small businesses, freelancers, and other self-employed workers. Here, we unpack the key measures for small businesses in Hunt’s big announcement to clearly explain what the 2024 Spring Budget means for you and your business.
National Insurance Cut
Much has already been made of the 2024 Spring Budget’s headline-grabbing announcement that employee National Insurance contributions are being cut by a further two percentage points. That’s on top of the two percentage point cut announced in last year’s 2023 Autumn Statement – bringing employee National Insurance contributions down to 8%. If you are an employer, be sure to alter payroll processes before this rate cut for employees comes into effect on 6 April.
While the cut to National Insurance contributions has fairly straightforward implications for PAYE employees, it all gets a bit more complicated if you’re self-employed. Currently, self-employed workers earning profits above £12,570 a year pay both Class 2 and Class 4 National Insurance Contributions. In the 2023 Autumn Statement, Hunt announced that Class 2 contributions – mandatory payments set at £3.45 per week – will be scrapped entirely. This change will take effect on 6 April 2024, when we enter the new tax year.
The 2023 Autumn Statement also saw the Chancellor announce that from 6 April 2024, Class 4 National Insurance contributions will be cut from 9% to 8% on profits between £12,570 and £50,270. Over £50,270, self-employed workers currently pay National Insurance contributions of 2%.
The 2024 Spring Budget has built on these previously announced cuts by further reducing National Insurance contributions for self-employed workers. Now, from 6 April 2024, self-employed Class 4 National Insurance contributions will be cut from the proposed 8% to 6% on profits between £12,570 and £50,270.
The Chancellor claims that reduced National Insurance contributions will save the average self-employed worker £650 when combined with the cuts already announced in the 2023 Autumn Statement.
Increased VAT Registration Threshold
The Chancellor also announced in the 2024 Spring Budget that the government wants to reduce the administrative and financial burden of VAT on small businesses. As a result, the government will increase the VAT registration threshold – the amount of money your business can earn before you must register for VAT.
Currently, the VAT registration threshold stands at £85,000. Under new plans announced in the 2024 Spring Budget, the VAT registration threshold will rise to £90,000 in April 2024. The Chancellor claims this change will take around 28,000 small businesses out of paying VAT altogether.
Full Expensing For Leased Assets
From a business perspective, another important announcement in the 2024 Spring Budget has to do with capital allowances.
Capital allowances are a form of tax relief which let businesses deduct the value of certain items from their profits, ultimately resulting in a lower tax bill. Allowances may be claimed on equipment, machinery, and certain business vehicles.
Full expensing is a first-year capital allowance which allows companies to deduct 100% of the total cost of qualifying investments from taxable profits in the year in which the expenses were incurred. There is no definitive list of what qualifies for full expensing, but the government’s examples of investments which may qualify for full expensing include:
- machines like computers, printers, and lathes
- office equipment
- vehicles, like vans, lorries and tractors – but not cars
- construction equipment
- kitchen and bathroom fittings, and fire alarm systems in non-residential properties
Full expensing – previously only a temporary initiative – was made permanent in the 2023 Autumn Statement. What’s new in the 2024 Spring Budget is that full expensing will soon apply to leased assets “when affordable to do so”. At the moment, full expensing only applies to assets which are purchased by the qualifying business.
The Chancellor says draft legislation on full expensing will be published within a few weeks. Full expensing, the government claims, amounts to a £10 billion tax cut every year for businesses investing in the UK.
Fuel Duty Freeze
In 2022, Rishi Sunak introduced a temporary 5p cut in fuel duty, which – having already been extended in 2023 – was due to finally expire this month.
However, Hunt announced in the 2024 Spring Budget that fuel duty would remain frozen – and the 5p cut would remain in place – until March 2025. The Chancellor claims this measure will save the average car driver £50 over the course of the year.
For sole traders who rely on their car for work, the fuel duty freeze is likely to be a welcome measure. Without Jeremy Hunt’s intervention, the reversal of the 5p cut plus an inflation-linked increase could have seen fuel duty hiked by as much as 13 percentage points.
Help for Hospitality
The government says it wants to support UK hospitality businesses – with pubs getting a special mention during the 2024 Spring Budget.
During last year’s Autumn Statement, Jeremy Hunt announced a freeze in alcohol duty until August 2024. Today, the Chancellor pledged that this freeze in alcohol duty will be extended until February 2025 – staving off a three percentage point increase. The hope is that this will help pubs and other hospitality businesses keep their prices down.
Recovery Loans
Hunt also announced today that the government will commit £200 million of funding to help small businesses invest and grow. This support is effectively an extension of the government’s post-pandemic Recovery Loan Scheme. To be eligible for a loan, UK businesses must have a turnover of £45 million or less, must be viable and must not be in financial difficulty. You can find out more about the scheme at Gov.uk.
In line with the growth-heavy theme of the Chancellor’s 2024 Spring Budget, this initiative is now being renamed the Growth Guarantee Fund.
Furnished Holiday Lettings Regime Abolition
The Chancellor also announced that the Furnished Holiday Lettings tax regime will be abolished. The government says abolishing this tax regime will raise £245 million a year – at the same time as making it easier for people to find homes in their communities.
Currently, under the Furnished Holiday Lettings tax regime, rental income from qualifying properties is subject to special rules and provisions – including Capital Gains Tax reliefs and capital allowances. These allowances will be scrapped from April 2025.
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