How will the 2024 Spring Budget affect your small business?

The Chancellor, Jeremy Hunt, has outlined his latest plans for the UK economy in the 2024 Spring Budget - possibly the last one before a general election. 

Although inflation has fallen to 4.00%, it's still above the government's 2.00% target. The Office for Budget Responsibility (OBR) predicts this target will be hit within the next few months. This means that already high prices are still rising, just at a slower rate than they have been. 

This Spring Budget comes just after it was announced that the UK has fallen into a recession. Although this might not be as bad a situation as it sounds - as we highlighted in Issue #78 of The Backbone - it should still have an impact on the Chancellor's outlook.

As expected, there are more tax cuts through changes to National Insurance Contributions (NICs) and an altering of the VAT registration threshold. But there will be no more government support for business energy bills once the Energy Bills Discount Scheme ends on March 31.

But what does it all mean for you and your business? Let’s take a look. 

What does the 2024 Spring Budget mean for your business?

There are always winners and losers where tax is concerned, which means Spring Budgets and Autumn Statements are usually pretty divisive affairs. That’s why we’re just going to report the facts about those bits that relate to business and leave you to decide whether it was a good Budget for you. 

Energy bill support

Energy prices have been coming down since they peaked in August 2022, when gas wholesale prices were 593p per therm (around 29 kWh) and electricity wholesale prices were £522 per MWh (1,000 kWh). 

To put that in perspective, gas wholesale prices are now 76p per therm, while electricity wholesale prices are £69 per MWh. 

And so the government will, as planned, call an end to the Energy Bills Discount Scheme on March 31. There will be no further support for non-domestic energy bills after this time.

And remember, there’s no price cap on non-domestic energy. The latest price cap will kick in on April 1, but it won’t affect your business energy bills.

Comparing quotes and fixing your rates is the only way to secure bill certainty and avoid any future price volatility.

Other energy-related news from the 2024 Spring Budget:

• The UK’s windfall tax on the profits of oil and gas companies will now run until March 2029. This is expected to raise an estimated £1.5 billion.
• £160 million investment in Great British Nuclear, promoting more jobs to power one-quarter of the UK’s electricity generation by 2050. It’s estimated that Great British Nuclear will bring £120 million to green initiatives nationwide and contribute towards a new grid system.
• The Climate Change Agreement Scheme (CCA) will run until March 2025 to give eligible businesses tax relief for energy efficiency measures. CCAs are available for a wide range of sectors including energy-intensive industries like chemicals and paper production, supermarkets and agricultural businesses. Find out more about CCAs at the government website. 

National Insurance 

A cut to National Insurance Contributions (NICs) was this Spring Budget's main headline-grabber, but this will only be of relevance to employees and not business owners. 

As per the 2023 Autumn Statement, the main employee National Insurance rate was cut from 12% to 10% on January 6, 2024. A further 2p reduction will cut this from 10% to 8% as of April 6, 2024.

As an employer, you will still pay NICs at a rate of 13.80% for all employees who earn more than £8,840 per year (excluding those aged 21 or under and apprentices aged 25 or under). 

The Employment Allowance will stay at £5,000 until March 2026. This means eligible employers can cut their employer NICs bills by up to £5,000 per year, a tax cut worth up to £1,000 per employer.

If you’re self-employed, National Insurance Contributions will be cut from 8% to 6%. and there are changes to both "Class 2" and "Class 4" rates. All of which will kick in from April 6, 2024: 

• "Class 2" National Insurance paid by self-employed people earning more than £12,570 will be scrapped. That will get rid of a flat rate compulsory charge of £3.45 a week. 
• "Class 4" National Insurance will be cut from 9% to 8%. This is payable on profits between £12,570 and £50,270. It will stay at 2.73% on profits over £50,270. 

These National Insurance thresholds are set to stay the same until 2028.

Business rates 

Business rates are taxes on property used for business purposes, such as offices, shops, pubs, and warehouses. You can check out the government website for more information on business rates.  

Business rates are calculated by using a multiplier. The rateable value of your business property is multiplied by this number to give you your final bill. If the rateable value of your property is below £51,000, your bill will be calculated using the small business multiplier. This will continue throughout 2024/25.

You can get an estimate of your property’s 2024/25 rateable value at the government website. 

The Retail, Hospitality and Leisure business rates relief scheme will be extended for another year. This gives eligible properties a 75% relief on business rates, up to a cash limit of £110,000 per business.  

You can find out more about eligibility and see some examples of how much different business properties save on the government website. One thing to note is that the eligibility section will talk about ‘hereditaments’ - in this context, it just means a business property or a property that’s not classed as domestic (such as one that’s occupied by a charity). 

Income Tax 

Income tax is a tax you pay to the government based on your yearly income. This tax goes towards funding public services, including the NHS and schools, as well as social security, such as universal credit and the state pension. The 2024/25 income tax rates for England and Wales are: 

VAT  

VAT is charged on all goods, services and other 'taxable supplies'. The Chancellor announced there would be a two-year extension to the threshold at which businesses must start paying VAT. This VAT registration threshold will increase from £85,000 to £90,000 from April 1, 2024. 

This means your business doesn’t need to pay VAT on its first £90,000 of taxable turnover.

Dividend tax 

If you’re a company shareholder, dividends are the money you get from company profits. Unlike with salary payments, your company must be making a profit after tax before it can pay dividends. Dividend tax is the tax you need to pay on these dividends.  

The following dividend tax rates will apply from April 6: 

• Ordinary rate – 8.75% 
• Upper rate – 33.75% 
• Additional rate – 39.35% 

Your income tax band dictates the rate of tax you pay on dividends above the allowance. From April 6, 2024, this will be cut to £500.

Capital gains tax  

Capital gains tax is a tax on assets that have increased in value. If you’ve had an asset for more than a year and its value has gone up, you’ll be charged capital gains tax when you sell it. 

From 6 April 2024, the capital gains tax-free annual allowance will be cut from £6,000 to £3,000. 

The Chancellor announced the higher rate of capital gains tax on residential property will be cut from 28% to 24%.

Wages

The national living wage - the minimum amount that can be paid to workers who are 21 and over - will rise by 9.8% from April 2024, when the following will apply:

• £11.44 per hour for employees aged 21 and over   
• £8.60 per hour for employees aged 18-20  
• £6.40 per hour for employees aged under 18  
• £6.40 per hour for apprentices 

Fuel duty 

The 5p fuel duty cut that was introduced in March 2022 will continue and will be frozen for another 12 months. The chancellor said that fuel duty will not increase in line with inflation.  

Anything else? 

The chancellor announced some other measures that will be of interest to some business owners. 

• A new ‘vaping excise duty’ will be introduced for manufacturers and importers of vapes. This is likely to work similarly to the current levy on tobacco, where duty is paid on the weight of the product. As things stand, vaping products and non-tobacco nicotine are taxed at 20% VAT. E-cigarettes have a lower 5% rate if they’re regulated as medicines for those trying to quit smoking. There will also be a one-off increase in tobacco duty, the amount it’s set to increase by is yet to be announced. 
• The alcohol duty freeze will be extended until February 2025. Check out the government's website for a full rundown of the current alcohol duty rates.
• £362 million will be invested in manufacturing in the UK and he also claims to support British farmers with £125,000 in this budget.
• £200 million to fund the Growth Guarantee Scheme, an extension of the Recovery Loan Scheme. When the current scheme ends in June 2024, it will be replaced by the Growth Guarantee Scheme, which will run until March 31, 2026.

How to cut your business costs 

There’ll no doubt be parts of the Spring Budget that will benefit your business, while you’ll probably look at other bits with a lot less enthusiasm. In any case, it's always worth looking for ways to cut your business costs. Switching business essentials with Bionic is a good place to start. 

Business essentials are those critical products and services that help keep your business running from day to day - energy, insurance, and connectivity.  

Our tech-enabled experts compare deals on business gas, business electricity, business insurance, business phone, and business broadband. If you want to future-proof your business against the 2025 digital switchover, we can help you find the perfect business VOIP package 

Our Think Business Loans team can also compare business loans and finance to help your business with cash flow or expansion.