Chancellor Jeremy Hunt’s spring budget didn’t veer far from the script in terms of what was predicted beforehand. Indeed, it was every bit the typical election year budget, in which a series of crowd-pleasing policy changes were announced. While the chancellor may hope that his announcements will be enough to turn the political dial ahead of the general election, SMEs and other UK companies will be more interested in how the changes affect them.
Luckily, with political points to be scored, there are several positive policy changes in the budget announcement for business owners to take advantage of. The headline 2% cut to National Insurance payments is unlikely to see the start of a spending surge, however. Critics had already noted after the initial 2% cut in the autumn statement that the cuts would mainly result in a fiscal drag. This is where salaries rise but the threshold for higher taxes doesn’t. With Income Tax thresholds remaining frozen, this change will have a limited effect on the economy.
Some positive changes
More promisingly, for many small businesses at least, is the increase in the VAT threshold from £85,000 to £90,000. The £5,000 increase doesn’t quite bring us to the £100,000 threshold that was whispered in political circles beforehand, but will be gratefully accepted nonetheless. This will allow scores of small SMES that operate around the threshold figure to accept more work without fear of straying into the taxation bracket so easily.
Critics will point to the seven years prior that this threshold has been frozen, and suggest that a 5.8% rise doesn’t cover the rate of inflation during that period. Those likely to be able to take advantage of this increase, however, will welcome the opportunity to be able to earn more.
Speaking on the changes outlined in the announcement, Bel Turpin, Business Development Manager for Turpin Accounting Services, mentioned that “the recent tax policy changes have stirred discussions amongst small businesses, especially the increase in the tax allowance threshold offering relief, easing the financial burden and providing flexibility for investment.
“The proposed reduction in National Insurance contributions is also welcomed as it lowers operational costs and stimulates economic activity. Raising the VAT threshold, meanwhile, will benefit SMEs, allowing them to expand before facing VAT payments, reducing administrative burdens, and fostering entrepreneurship.
Freezing fuel duty will ease operational costs for businesses reliant on transportation, giving stability amid fluctuating fuel prices, while the proposed changes to child benefit thresholds addressing the unfairness of the current household rulings aiming to reflect individual parent earnings rather than household income are also welcomed by SME owners”.
Changes elsewhere
Elsewhere, there was welcome news for the drinks industry with the extension of the freeze on alcohol duty. The 3% rise that has been delayed would have hurt many in an industry that is seeing multiple casualties as it is. Several mid-sized breweries and outlets already had to close their doors in just the first month of the year.
Managing Director of Forbes Burton, Rick Smith welcomed the freeze on fuel duty as well as alcohol duty, but would like to see more permanent moves, he suggests that “the recent trend of extending temporary freezes provides regular positive news for chancellors to report on, but similarly leaves businesses in a state of limbo as the can is kicked further down the road. As it stands, however, such freezes provide breathing space for some companies at a time when any rise in operating costs could have been catastrophic”.
Those involved in the manufacturing of vaping products will now be waiting on details of a levy on their products in a move designed to discourage children from using them. The levy on tobacco was raised in line with this to keep vaping as a cheaper option, in the hope that smokers would continue to turn to using vape products instead.
Plans were also announced to reduce taxes paid in the film industry, and a £270 million investment in advanced manufacturing industries. These would have a focus on zero-emission, clean motor and aviation technology.
Does your business need extra help?
We’ve helped countless businesses to navigate difficult situations and have been trusted by directors nationwide to deliver honest and effective advice. Companies across most sectors now are struggling with rising inflation, the cost-of-living crisis, and soaring energy bills. Call us on 0800 975 0380, or email [email protected] for a free consultation to find out how we can help.
We're here for you.
As a dedicated team of Advisers and Consultants our aim is to help you fix the issues and solve the problems within your business.
Find out more →
