VAT registration changes, National Insurance reductions and more – The Spring Budget 2024

Kirsty Young News, Tax

Well, here we are again, at what one client named ‘The Superbowl for Accountants’ – the annual budget from the Chancellor. (Only with less Alicia Keys and body armour.)

Here in the office, we like to get some food in and gather to cheer and heckle whilst we take in the latest changes to tax and small business finances. So now that we’ve finished the nibbles and snacks, we can break down the key points for you, the small business owner.

 

The Highlights

We use the term “highlights” lightly… What highlights there were proved to be slim picking for small business owners, a trend over the past few statements.

🌟 National Insurance (NI) for the employed

National Insurance was reduced for the employed again. Last autumn, National Insurance for workers was cut from 12% to 10%. In a further reduction, from 6th April 2024 NI is cut from 10% to 8%.

    • For limited company owners this is unlikely to be that exciting, as they often pay themselves in dividends.
    • For any paid team members within the business, this all-round good news.

🌟 National Insurance (NI) for the self- employed

It’s also good news for self-employed owners. The National Insurance rate for this group will drop again from 9% to 6% from 6th April 2024. Part of this is actually old news, as a 1% reduction was already announced at the Autumn Statement.

The government were already planning to abolish ‘Class 2’ national insurance as well. Class 2 is a small secondary national insurance paid by self-employed people. As the Gov website Autumn Budget statement explained:

“From 6 April 2024, self-employed people with profits above £12,570 will no longer be required to pay Class 2 NICs, but will continue to receive access to contributory benefits including the State Pension.”

🌟 VAT registration

The VAT registration limited was raised from £85,000 to £90,000. So, from 1st April 2024 you now only have to be VAT registered after you exceed £90,000 of taxable sales in a 12-month period. We doubt this will be massively impactful, but will help for those businesses that like to keep just under the limit.

🌟 Child Benefit

Child benefit is paid to one parent or guardian of any child aged under 16. It’s a major benefit as it includes:

    • An allowance for each child paid every 4 weeks
    • National Insurance credits for your State Pension
    • A National Insurance number for your child when they turn 16

The Child Benefit ‘limit’ has been raised and tweaked. Currently:

    • If one person in the household earns over £50,000 a year, you start to repay child benefit you receive.
    • As soon as one person in the household earns over £60,000 a year, it’s repaid in full.

The oddity to the system is you can have two people earning £49,999 in the same household and not repay anything. The Chancellor announced they are changing this to a ‘household income system’ by April 2026, but the details of this are not known yet.

In the meantime, the government are also raising the threshold when repayments start. From April 2024 this rises to £60,000 per year, and the benefit are only entirely lost when earning over £80,000 per year. This is a very welcome change.

🌟 Capital Gains Tax on residential property

in order to ‘support the housing market’, Capital Gains Tax (CGT) on residential property has been reduced. This means that when you sell a residential property, the maximum rate of tax you will be charged on any gain you make is down from 28% to 24%.

 

Changes you could say are not good news (depending on your view)

👉 Furnished holiday let rules

Furnished holiday let (FHL) rules are being abolished from April 2025.I f you currently have a holiday let, you might qualify for the fairly tax advantageous ‘FHL’ rules. We won’t go into the details, but in short ,it’s a downgrade in tax relief for you where this applied. You will now be treated like any other rental business, so will lose access to some reliefs. We’ll post more details when we have them

👉 The end of ’non-dom’ status

Non-dom status is going. The media have pumped this up big time for headlines in the past, but for most small business owners this was not really a concern. If you were one of the rare people in the scheme, this is being replaced with a four-year grace period.

 

The Missing Bits – what people actually wanted

For small business owners there wasn’t much to get excited about. From our conversations, owners would have liked to have seen measures such as:

😕 A reduction in employers National Insurance or a rise in the threshold

Currently employers start paying National Insurance at 13.8% on behalf of most of their employees. This is at a lower threshold level than the employee themselves.

😕 A reduction in ‘dividend tax’

Whilst national insurance has gone down (twice!), there have been no tweaks to the tax levied on dividends. For most limited company owners, this is not heartening news.

😕 Changes to the personal allowance or higher rate tax ‘bands’

The amount you get tax free each year has not moved, nor has the amount you can earn before paying the higher rate of tax. This means each year as income rises (hopefully!), more people get dragged into the higher rate rates.

 

Other niche bits of interest

And they are pretty niche too!

  • For those looking to run a film studio, there are extra tax credits and business rate reliefs.
  • For museums, galleries, theatres etc there are permanent extensions to the previous tax reliefs.
  • The government are consulting on Crypto-Assets again
  • HMRC has published a new opinion on training costs for sole traders and the self-employed. This is much better – more from us to come on this topic.
  • A new £5,000 UK investment ISA is being launched. This can be held in addition to the current ISAs.

 

Battling with your own Budget?

For in-person help on sorting your business finances, just get in touch with us. We offer a 1 hour, 1-2-1 consultation with our expert accountants, which is brilliant if budgets are just not your thing. It’s an easy and hassle-free way to get the help you need, when you need it. And that includes you, Mr Hunt – just contact us anytime!