UK Chancellor Jeremy Hunt delivered the Spring Budget on 6 March 2024. This year’s Budget highlights a commitment to lower tax rates, drive investment and work towards sustainable, long-term growth. Here is a summary of the changes relevant to businesses.
Supporting SMEs
Recognising Small and Medium-sized Enterprises (SMEs) as the core of the economy, the government will be implementing several initiatives that can help businesses obtain financing that will enhance their growth.
Increasing the VAT registration threshold
Effective from 1 April 2024, the value-added tax (VAT) registration threshold will be raised from £85,000 to £90,000. This increase will support businesses by allowing more to focus on growth before entering the VAT system.
Extending the Recovery Loan Scheme
Originally due to end in June 2024, the Growth Guarantee Scheme (previously the Recovery Loan Scheme) will continue through March 2026. This scheme provides SMEs in Great Britain with access to loans up to £2 million and up to £1 million in Northern Ireland, backed by a 70% government guarantee. These funds can be used for various business needs, ranging from addressing cash flow concerns to fuelling growth initiatives.
Encouraging investments into new businesses
The government plans to legislate the reinstatement of the former eligibility criteria for individuals to be considered high net worth or sophisticated investors. It will undertake a thorough review of the exemptions' scope.
This move is expected to be positively received by new and expanding UK businesses , demonstrating the government's dedication to fostering investment in the nation's ventures.
Providing guidance on tax deductibility
Sole traders and the self-employed can now refer to new guidance released by His Majesty’s Revenue and Customs (HMRC) on the tax deductibility of training costs. This guidance confirms that expenses incurred in updating current skills, keeping up with technological advancements, or adapting to industry changes qualify as allowable costs when calculating taxable profits.
Driving growth in various sectors
The government will continue to support the following sectors, aiming to transform the UK into a global innovation hub:
Creative industries
The UK Spring Budget 2024 introduces the Independent Film Tax Credit (IFTC), set at a 53% rate for eligible film production expenses. Eligibility for the IFTC requires films to meet criteria set by the British Film Institute. This will apply to films starting principal photography on or after 1 April 2024, covering costs incurred from this date onwards. Filmmakers can start submitting their claims from 1 April 2025.
In a bid to encourage investment in new studio space and maintain the UK's leading position in film and high-end TV production, the government will offer a 40% relief on gross business rates bills for qualifying film studios in England through to 2034.
Digital technology and AI
Companies and researchers may soon gain access to the UK's leading public compute facilities and have the computing power necessary to create world-class AI products, as outlined by the government.
The government has also unveiled a new £7.4 million upskilling fund pilot aimed at equipping SMEs with the AI skills necessary for future opportunities. This initiative will be supported by the upcoming SME Digital Adoption Taskforce, focused on enhancing productivity through digital technology adoption. Together, these efforts align with the AI Opportunity Forum's mission to boost AI adoption within the private sector, driving productivity, innovation, and economic growth across various industries.
Green industries
To accelerate the expansion of the UK's green industries, the government has pledged an additional £120 million to the Green Industries Growth Accelerator (GIGA), aimed at fostering the growth of low carbon manufacturing supply chains nationwide.
Approximately £390 million is also allocated to enhance the supply chains of offshore wind and electricity networks, with an equal amount dedicated to supporting the supply chains for Carbon Capture Utilisation and Storage (CCUS) and hydrogen.
Life sciences
Following the Autumn Statement 2023, which unveiled £520 million in new funding for life sciences manufacturing, the government plans to initiate competitions for major transformative investments, attracting expressions of interest. There will also be a competition for medium and smaller-sized companies slated to happen this year.
Advanced manufacturing
The government is dedicated to establishing the UK as the leading destination worldwide for initiating, developing, and investing in manufacturing enterprises. In line with this commitment, the Spring Budget outlines the progression of a £4.5 billion funding initiative aimed at encouraging investment across manufacturing sectors such as automotive, aerospace, life sciences, and clean energy.
This allocation provides more than £2 billion to the automotive sector and £975 million to aerospace, with the funds being accessible over a five-year period starting from 2025.
Additionally, the Spring Budget reveals plans to strengthen the UK's position in advanced manufacturing. Among these is the confirmation of the £50 million Apprenticeship Growth Sector pilot, aimed at increasing funding for qualified providers. This funding will support the delivery of 13 high-value apprenticeship standards across advanced manufacturing, green industries, and the life sciences sectors.
Additional highlights
Beyond the above announcements, the UK Spring Budget 2024 also covered other changes likely to impact business savings and workforce strategies.
Tax cuts for employees
From 6 April 2024, the government will reduce the main rate of employee National Insurance Contributions (NICs) from 10% to 8%. NIC rates for the self-employed will also decrease from 8% to 6%. This drop may be good news for both workers, who have felt the pinch on their earnings, and businesses, which have contended with rising expenses.
Replacing the non-dom tax regime
The existing non-dom tax regime will be phased out and substituted with a new residence-based system. Starting from 6 April 2025, individuals relocating to the UK will enjoy a tax exemption on foreign income or gains for their initial four years.
Subsequently, they will be subject to taxation on par with all other residents. This new system could draw in a greater number of skilled workers and entrepreneurs to the UK.
It is important to note that this will be a significant change for existing non-doms as the way their foreign income and capital gains are taxed will change from 6th April 2025.
Full expensing for leased assets
Businesses may soon be able to deduct the expenditure on plant or machinery for leasing, thanks to the extension of full expensing.
Full expensing enables UK companies to offset the entire cost of capital equipment from their taxable profits, which can lower their total tax obligations. The expansion of this scheme to include leased assets is thus a helpful development for businesses. The start date for the relief has yet to be disclosed.
Abolishing the Stamp Duty Land Tax (SDLT) relief for multiple dwellings
Starting from 1 June 2024, the Multiple Dwellings Relief (MDR) will cease. Initially designed to foster investment in residential property and the private rented sector, the MDR did not meet these objectives according to an external evaluation.
Individuals purchasing a single dwelling will not be affected by this change. However, it will lead to an increase in the SDLT payable for those acquiring two or more dwellings in a single transaction or related transactions. This adjustment will also impact businesses.
Nonetheless, transactions with contracts exchanged on or before 6 March 2024 can still access the relief, irrespective of their finalisation date. Any other purchases completed before 1 June 2024 will likewise retain this benefit.
Abolishing the Furnished Holiday Lettings tax regime
The government also plans to abolish the Furnished Holiday Lettings tax regime, eliminating the tax advantage enjoyed by landlords renting out short-term furnished holiday properties. Currently, landlords who opt for the FHL regime can deduct their entire mortgage interest from their profits and obtain capital gains tax relief when selling the property, among other benefits.
This change will come into force on 6 April 2025, with draft legislation set to be released soon.
Summary of the UK Spring Budget 2024
Overall, Spring Budget 2024 sets out a series of measures that can support businesses in the UK. Through financial assistance and tax adjustments, businesses can leverage the available support and position themselves advantageously for future opportunities.
Contact us below to speak with our experts at Hawksford about what the changes mean for your business.
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