Budget 2024: Key takeaways for business and reaction

Jeremy Hunt appeared before MPs today for the Spring Budget, with a 2p cut to the national insurance rate paid by both employees and the self-employed at the heart of his vision.

While interest rates remain high, the chancellor noted that the UK economy has weathered the financial crisis, pandemic, and soaring energy prices amid war in Europe.

He assured the country that inflation should fall below the government’s 2.0 per cent target in just a few months’ time – ‘nearly a whole year earlier than forecast in the autumn statement’ and down from 4.0 per cent in January.

That will come alongside anticipated growth of 0.8 per cent for the national economy in 2024, rising to 1.9 per cent next year and peaking at 2.0 per cent in 2026. Growth is then expected to slow to 1.8 per cent in 2027 and 1.7 per cent in 2028.

Meanwhile, the government is set to boost day-to-day spending by 1.0 per cent in real terms over the next five years.

There was good news for SMEs, too, with the threshold at which companies must register to pay VAT set to rise from £85,000 to £90,000 this April, as well as an extension for the Covid-era government loan scheme for small businesses until March 2026.

And some may benefit from the extension of full expensing, which allows businesses to offset investment in new technology and equipment, to encompass leased assets.

Mr Hunt also pointed to a new tax credit for independent UK films with a budget of less than £15 million, while the previously temporary tax reliefs for touring and orchestral productions will now be made permanent.

On the topic of taxation, a £5,000 UK ISA tax allowance for savers investing in ‘UK-focused’ shares is on the way subject to a consultation.

Property owners will be happy to hear that the higher rate of capital gains tax paid on residential sales has been cut from 28 to 24 per cent – though tax perks for owners of holiday lets were today scrapped along with stamp duty relief for buyers of second homes.

As for the ongoing energy crisis, the chancellor announced another freeze on fuel duty for the coming year and extended the windfall tax on the profits of oil and gas firms to 2029, a leaf from Labour’s book.

He went on to allocate £120 million for the country’s green energy sector, including offshore windfarms and carbon capture and storage projects, but with a particular focus on nuclear.

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Businesses around Hampshire have been reacting to the news.

Richard Goodman, Tax Partner at Menzies – which has offices in Whiteley and Farnborough – said:

“This Budget was largely a case of too little, too late for most businesses. The Chancellor needed to use today’s announcements to shore up the stuttering UK economy. A roaring success it was not.

“While the headline announcement, a 2p cut to the National Insurance contribution rate, is clearly aimed at winning over disgruntled voters, many still won’t be better off due to the freeze in tax band thresholds – a measure brought in when the PM Rishi Sunak was Chancellor.

“And as with last November’s Autumn Statement, it’s disappointing to see the Chancellor largely neglect British businesses with today’s measures. No such cut in the NI rate was announced for employer contributions, for example – a measure that would have been welcomed by struggling businesses in the retail and hospitality sectors especially.

“Further, while the current non-dom system is complicated and in need of reform, the longer-term removal of the benefit after four years may backfire with a sizeable impact to British businesses.

“Firms, especially in the City, are already facing intense competition in the race for global top talent, and the non-dom tax status has thus far been a powerful incentive to work in the UK. The Chancellor said himself in 2022 that these individuals could just as easily choose to live in other countries and contribute to their businesses and economies – and now they may well do so.

“Overall, today’s Budget has done more to secure media headlines than to secure long-term, sustained prosperity for British people and businesses.”

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Alan Rolfe, Senior Tax Manager at Chandler’s Ford-based HWB Chartered Accountants, said:

“There was inevitably a pre-election element to the Budget but, given the economic backdrop, few major surprises. Some technical changes to tax rules were unexpected. 

“The headline announcement for most people was the 2% National Insurance cut from this April. This benefits employees’ take-home pay and it means employers can offer the same salaries at less cost.

“The raising of the child benefit threshold for higher rate earners from £50,000 to £60,000, tapering down to zero at £80,000, is significant. It will enable substantially more parents to take advantage of child benefit while earning. 

“There was potentially good news for people looking for tax-free investment opportunities with the announcement of a consultation on a UK ISA. If it goes ahead, this will enable an extra £5,000 to be put into an individual savings account while encouraging investment in UK companies. If our economy grows, so in turn does the value of the ISA.

“Small businesses will benefit from the rise in the VAT registration threshold from £85,000 to £90,000. The ceiling has not kept pace with inflation in recent years and raising it will make all kinds of traders and firms a little more competitive in their pricing.

“There were three specific property tax changes which together paint a mixed picture for landlords.

“The abolition of the tax advantage on furnished holiday lets and the removal of stamp duty relief on multiple dwellings were both predicted.

“On the other hand, landlords and owners will welcome the 4% cut in higher-rate Capital Gain Tax on residential property sales. The jury is out as to whether or not this will stimulate more transactions and improve the market.”

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Tim Walker, Managing Director of Hampshire-based computer solutions company Aura Technology, said:

“I was encouraged to see our growth stats, especially when compared to other developed nations, and a growth projection of 1.9% is really positive.”

“Stimulating investment and the extension of the recovery loan scheme are excellent; that will help a lot of SME’s. It was also good to see the threshold at which small businesses must register to pay VAT raised from £85,000 to £90,000 from April.”

Freeports also made an appearance in today’s budget, but like many in the Hampshire business community, the lack of detail when it comes to what economic benefit it could bring to the region is still missing. Tim said: “It would be good to know more; hearing these investment announcements for freeports and similar is fantastic, but are they really up and running? And will they make a big difference anytime soon?”

One of the key highlights for Tim was Jeremy Hunt axing the UK’s non-dom rules, in a move that mirrors a longstanding Labour policy and which the Chancellor said would be used to cut taxes on working families in the UK. “It’s only right that those with the broadest shoulders should pay the most, a well-borrowed policy from Labour. It feels like a much fairer system as the money can then benefit working families.”

On green investment announcements, Tim felt disappointed. “It’s still tiny; £270 million for new technology research should be in the billions. Although seeing £230 million of funding going towards police technology to improve response times is positive, ensuring how these tech projects will be managed to ensure the money is well spent was not so well explained and could be crucial.”

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Ross McNally, Chief Executive and Executive Chair of Hampshire Chamber of Commerce, said:

“The Budget was not as pro-business as previous announcements from the Chancellor.

“Given where we are in the political cycle, with an election due this year, his focus was far more on the scope for personal tax changes and investment in public services than anything groundbreaking for business. 

“There were some welcome announcements, however.

“The extension of the ‘full expensing’ regime to leased as well as purchased assets will enable more firms to recoup investment costs associated with spending on plant, machinery and IT equipment.

“The raising of the VAT threshold from £85,000 to £90,000 will help the competitiveness of many smaller businesses.

“The 2p cut in National Insurance contributions will put more money into employees’ pockets and so give businesses more chance to hire and keep the staff they need.

“The extension for another year of the 5p fuel duty cut, which had been to end this month, will be welcomed by all firms who rely on motor transport.

“People looking to save and invest in a tax-efficient way while backing the UK will cheer the announcement of the new ‘British ISA’, an individual saving account with an extra £5,000 on top of the usual ISA limit.

“And in Hampshire, where we are actively looking to grow film and TV investment, the Chancellor’s announcement of more tax relief for these industries will go down well.

“Overall, amid all the current challenges for business and public services, and pressure to announce pre-election giveaways, the Chancellor held to his aim of remaining fiscally responsible.

“He showed positivity about the UK’s economic prospects and signalled his backing for businesses keen to invest.” 

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Mark White, Managing Director of Hampshire housebuilder Bargate Homes, said:

“I was expecting a brave Hail Mary from the Chancellor – not such a disappointing case of Hunt for the good news – given this is an election year.

“There was no support for SMEs, no sustainability initiatives beyond the reference to nuclear energy, and housebuilding is clearly not a top five priority for this government, which may result in a new political party in No.10.  

“We do welcome the drive to ease the cost of living crisis, namely the recently announced 12.3% fall in the Energy Price Cap, the 2% reduction in National Insurance, the Fuel Duty Freeze extension and 5p cut for another year, and the Household Support Fund continuing at current levels for another six months. We also support the child benefit tax threshold increases and the Government’s childcare plan. But this is against the backdrop of significant fiscal drag and a much larger overall personal tax burden. By 2028/9 tax levels are forecast to be at a record high of over 37%.

“We hope the 1% above inflation increase for public spending and the ‘in-full’ £2.5bn Public Sector Productivity Plan investment transforms the effectiveness of the NHS and other vital public services.

“However, apart from the ability to put more cash into an ISA, nothing was announced to help people buy beautiful, sustainable new homes – or the housebuilders who build them. Mr Hunt referenced 1 million new homes by the end of this Parliament, but has he forgotten the manifesto target for this five-year term was 1.5 million?!

“The Chancellor has missed a range of opportunities which could have made an immediate difference to the housing market, especially the crucial first rung. Green Mortgages for homes rated EPC-A or B should be significantly incentivised. A commitment to net zero targets could have been demonstrated by offering a Stamp Duty rebate for homeowners who retrofit eco technology into their homes. Similarly, feed-in tariffs should be reintroduced for homeowners with solar panels, to reward people for supplying renewable energy back to the grid.

“And what happened to the anticipated announcement regarding 99% mortgages? Or the industry’s hope of the reintroduction of Help to Buy, given it generated a surplus back to the Government for the best part of a decade. It is very unhealthy that the number of new homes being built is half what it should be and thousands of would be first time buyers can’t get a foot on the ladder.       

“If housebuilders could build more homes, we could look towards generating more tax revenue. However, this government’s planning and environmental policy changes are achieving the total opposite. DLUHC has failed to deliver enough new homes and every initiative I hear tabled could take five years to implement, which takes us towards the end of the next parliament!

“For this government to stay in power, it must get serious about tackling planning obstacles – not just for urban brownfield sites – and promoting housebuilding. It is such a huge and vital industry that supports the wider economy, and the lack of appropriate, sustainable, and affordable housing has become a heated and divisive political issue.”

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