The Chancellor Jeremy Hunt revealed the government’s future plans in what might be the last financial set piece event before the next General Election.
He reiterated that his main aims were to achieve growth and help alleviate the ongoing negative impact of the cost of living crisis on individuals and businesses.
We’ll look at the headlines more closely and dig into the small print to find out what the announcements will mean for you and your business.
Business Energy Bill Support
The government will let the Energy Bills Discount Scheme expire on March 31st as planned with no further support for non-domestic energy bills taking its place.
This decision has been taken because energy prices have been reducing since they hit their peak in August 2022 when gas wholesale prices were 593p per therm (29 kWh) and electricity wholesale prices were £522 per MWh (1,000 kWh).
Now gas wholesale prices have reached 76p per therm while electricity wholesale prices are at £69 per MWh.
There is still no price cap on non-domestic energy use so while the latest consumer price cap will take effect on April 1st, this won’t affect business energy bills.
There were some other energy related announcements including:-
- The Climate Change Agreement Scheme (CCA) will run until the end of March 2025 which will give eligible businesses tax relief for implementing energy efficiency measures. These are available in a wide range of sectors including supermarkets, agriculture and other energy intensive industries such as paper production and chemicals.
National Insurance Contributions (NICs)
Employees will be affected by the announcement to reduce the main employee National Insurance rate from 10% to 8% from April 6th 2024 but not their employers.
Companies will continue to pay NICs at the 13.80% rate for all employees earning £8,840 per year (excluding workers aged 21 or under and apprentices aged 25 or under.)
The Employment Allowance will stay at £5,000 until March 2026 which means eligible employers can cut their employer NICs bills by up to £5,000 a year, a reduction worth up to £1,000 per employer.
For the self-employed, NICs will be reduced from 8% to 6% with changes to “Class 2” and “Class 4” rates from April 6th.
“Class 2” National Insurance paid by self-employed workers earning more than £12,570 will be scrapped which will get rid of a flat rate compulsory charge of £3.45 per week.
“Class 4” National Insurance will be reduced from 9% to 8%. This is the amount payable on profits between £12,570 and £50,270. Profits over £50,270 will incur a rate of 2.73% which is unchanged with all National Insurance thresholds remaining the same until 2028.
Business Rates
Commercial properties with a rateable value of £51,000 will be calculated using the government’s small business multiplier throughout the financial year 2024/25.
The Retail, Hospitality and Leisure business rates relief scheme will be extended for another 12 months. This gives eligible properties a 75% relief on business rates up to a cash limit of up to £110,000 per business.
These sectors will be disappointed not to receive additional support as they have been lobbying hard for help over the past few months that have seen a disappointing Winter period.
Income Tax
The income tax rates for 2024/25 in England and Wales are set as follows:
| Tax Band | Taxable income | Tax rate |
| Personal Allowance | Up to £12,570 | 0% |
| Basic Rate | £12,571 to £50,270 | 20% |
| Higher Rate | £50,271 to £125,139 | 40% |
| Additional Rate | Over £125,140 | 45% |
VAT
The Chancellor announced there would be a two-year extension to the threshold at which businesses begin paying VAT.
From April 1st this will increase from £85,000 to £90,000. This means that companies don’t pay VAT on their first £90,000 of taxable turnover.
Jeremy Hunt later told MPs that while he was minded to increase this threshold further, he was unable to due to the agreement reached with the EU about the Northern Ireland protocol. If raised higher, it would only apply to Great Britain meaning there would be a different VAT regime in Northern Ireland and he didn’t want to create separate rules.
Dividend Tax
Company shareholders receive dividends from company profits and these are taxed differently from salaries. Companies must be making profit after tax before they can pay dividends and the rate of tax paid is based on the recipient’s income tax band.
From April 6th the dividend tax rates will be:
- Ordinary rate – 8.75%
- Upper rate – 33.75%
- Additional rate – 39.35%
This continues to make members’ voluntary liquidations (MVL) more attractive to any directors looking to most efficiently realise their assets.
Capital Gains Tax
This tax is based on assets that have increased in value. If the owner has held an asset for more than a year and its value has gone up then they will be charged Capital Gains Tax (CGT) when they sell it.
From April 6th the annual tax-free allowance for CGT will be cut by 50% from £6,000 to £3,000. The Chancellor also announced that 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 paid to workers aged 21 and over – will rise by 9.8% from April when the following rates will come into effect:
- Apprentices – £6.40 per hour
- Employees aged under 18 – £6.40 per hour
- Employees aged 18-20 – £8.60 per hour
- Employees aged 21 and over – £11.44 per hour
Fuel Duty
The 5p fuel duty cut introduced in March 2022 will continue and be frozen at that level for another 12 months. The Chancellor confirmed that fuel duty will not increase in line with inflation, currently at 4%.
Alcohol, Vaping and Tobacco
We’ve previously written about how the vaping industry was being targeted by the government and the budget contained announcements to underline this.
A new “vaping excise duty” will be introduced for importers and domestic vape manufacturers. This will work similarly to the current tobacco levy where duty is paid on the weight of the product.
Currently vaping products and non-tobacco nicotine are taxed at 20% VAT. E-cigarettes have a 5% VAt rate if they’re regulated as medicines for those trying to quit smoking.
There will be a one-off increase in tobacco duty with the amount to be announced. Alcohol duty will remain frozen until February 2025.
Investment
Manufacturing will see £362 million invested across the UK with farmers set to receive £125,000 each through budget measures.
There will be £200 million to fund the Growth Guarantee Scheme, which is an extension of the Recovery Loan Scheme which ends in June 2024. The Growth Guarantee Scheme will replace this and will run until March 31st 2026.
The Chancellor also announced that he plans to allow full expensing to apply to leased assets. This will allow businesses to offset investment in items such as new machinery and IT equipment against tax.
Directors and business owners are always scouring the announcements, budget briefings and running calculators to work out if they are going to be financially ahead or behind on the latest announcements.
While their accountants will always have the most accurate projections and information, there is another strategy guaranteed to give them a clearer insight into their current position and trajectory.
This is a free initial consultation with one of our team of advisors.
Once they get a clearer understanding of the unique circumstances and challenges facing the business, they will be able to help them draw up a detailed roadmap to help them reach their short, medium and longer term goals and avoid any potholes the Chancellor hasn’t got around to mending along the way.
The earlier owners and directors get in touch, the sooner they can get to work putting the finishing touches to their own budgets for 2024 and beyond.