Spring Budget: Business Changes
BUDGET BOOSTS SMES AND HIGH-GROWTH INDUSTRIES
After the more comprehensive business support and tax cuts announced in the 2023 Autumn Statement, such as making the full expensing policy permanent, the 2024 Spring Budget was lighter on headline-making pro-business announcements.
However, it still contained targeted support for SMEs, high-growth companies and key industries like manufacturing, creative sectors and the life sciences.
The upcoming increases in the VAT threshold and extension of the Recovery Loan Scheme will be particularly beneficial for smaller firms.
Making full expensing permanent remains the current Government’s flagship pro-investment tax policy. However, businesses will be keenly awaiting more details on how this will be legislated.
With inflation still elevated and a general election due this year, the Chancellor had to carefully balance support for businesses and the general public, with policies like extending fuel duty relief appealing to both.
VAT REGISTRATION THRESHOLD
In a boost for small businesses, the VAT registration threshold will increase from £85,000 to £90,000 from 1 April 2024. This marks the first increase in seven years.
The Chancellor said this would “reduce the administrative and financial impact” for SMEs, explaining it will bring approximately 28,000 small businesses out of collecting, reporting and paying VAT altogether.
FURNISHED HOLIDAY LETTINGS REGIME
In a move to make the property market fairer for renters, the Furnished Holiday Lettings (FHL) regime will be abolished from April 2025.
The change aims to increase long-term rental options for locals and raise tax receipts to help fund national insurance cuts. It is estimated that the change will raise around £300m from landlords who benefited from the furnished holiday lettings scheme.
Properties meeting the qualifying tests for FHLs are taxed under special rules and owners of such properties can access specific tax advantages not available for other lettings, including:
Entitlement to plant and machinery allowances on items of fixtures, furniture, furnishings and equipment. The relief also allowed utilisation of the 100% annual investment allowance and, for corporates, the 130% super-deduction or 100% full expensing for expenditure incurred on such items.
Capital gains tax (CGT) reliefs for traders such as rollover relief and mitigating CGT on disposal of a property.
Finance and interest restrictions did not apply to loans and mortgages on FHL properties.
The new measures will have far-reaching consequences for owners who have let their properties for holiday rental income and met the criteria set out in the FHL regime. It includes those who might own a single holiday home made available for letting or those who let their properties through Airbnb or similar agencies.
Hunt explained his reasoning, arguing that this measure would help alleviate housing strain in coastal areas where landlords are converting properties into short-term holiday lets to the detriment of local populations.
SME SUPPORT
Recognising the vital role of small and medium enterprises (SMEs) in the economy, the Spring Budget built on the SME support measures from the Autumn Statement.
In addition to raising the VAT threshold, key announcements include:
Funding business growth: Providing £200m of funding to extend and rename the Recovery Loan Scheme to the ’Growth Guarantee Scheme’, helping SMEs access necessary financing.
Encouraging investments: Publishing updated HMRC guidance on the tax deductibility of training costs for sole traders and the self-employed to encourage productivity-boosting investments.
Reinstating the previous eligibility criteria for qualifying as a high net worth or sophisticated investor, along with reviewing the scope of these exemptions.
INVESTMENT AND GROWTH INITIATIVES
The Spring Budget contained several measures focused on encouraging business investment and growth:
Pension reforms: Continuing work on the Mansion House reforms to the pension system, with the goal of unlocking up to £75bn of pension fund capital.
Recovery Loan Scheme: The Government will extend the Recovery Loan Scheme, rebranding it as the Growth Guarantee Scheme. This program aims to help around 11,000 SMEs access the financing they need to invest and expand.
Investment zones: In April, the first investment zones will launch in the North of England and the Midlands. These zones will offer tax breaks and planning liberalisations to attract business investment.
INVESTING IN INDUSTRIES OF THE FUTURE
The Spring Budget reaffirmed the Government’s commitment to making the UK a global leader in science and innovation.
Building on the £750m R&D package announced in the 2023 Autumn Statement, the Chancellor unveiled several new measures:
£14m to boost the UK’s public sector research and innovation infrastructure.
Establishing an HMRC expert advisory panel to improve the administration of R&D tax reliefs. The panel will provide insights into the cutting-edge R&D occurring across sectors such as tech and life sciences, and work with HMRC to review relevant guidance, ensuring it remains up to date and provides clarity to claimants.
SPECIFIC INDUSTRY IMPACTS
Hunt also used the Budget to build on a wider Government strategy to support key sectors – including creative industries, advanced manufacturing, green industries, digital technology and AI, and life sciences – to drive economic growth and innovation.
CREATIVE INDUSTRIES:
Hunt described the UK as Europe’s “largest film and TV production centre”, and announced support of more than £1bn in additional tax relief over five years for the £125bn creative industry, which employs 2.4 million people in the UK.
Measures included:
53% tax credit for eligible independent
British films with budgets under £15m.
40% business rates relief until 2034 for eligible film studios.
5% increase in relief for UK visual effects.
Funding for 200 new apprenticeships per year at the National Film and Television School.
Permanent higher tax relief rates of 45%/40% for theatres, museums, galleries and orchestras.
GREEN INDUSTRIES:
An additional £120m allocated to the £1bn Green Industries Growth Accelerator for low-carbon manufacturing supply chains.
Largest ever £1bn+ renewable energy auction round announced.
£160m deal with Hitachi to purchase two prospective nuclear power
plant sites on Anglesey and in Gloucestershire that had been mothballed.
DIGITAL AND AI:
Plans to be set out to ensure access to public computing facilities for developing AI products.
£7.4m fund to support SME AI skill development.
SME Digital Adoption Taskforce to investigate boosting productivity through technology.
The Alan Turing Institute to receive up to £100m over five years.
LIFE SCIENCES:
Following the £520m in manufacturing funding announced in the Autumn Statement, the Government has confirmed large-scale investment competitions for this summer and an SME track in autumn.
£45m to support early-career medical researchers specialising in conditions such as dementia, epilepsy and cancer, including £3m for Cancer Research UK.
Download a full copy of the report here.