The latest UK Budget has introduced several significant changes aimed at balancing economic growth with fiscal responsibility. Here's a streamlined summary of the most impactful changes and what they mean for individuals and businesses alike in the government’s own words.

National Minimum Wage

To help tackle the rising cost of living, the national minimum wage will increase to £12.21. This change represents a substantial boost for lower-income earners, designed to provide more financial stability. This increase is likely to benefit millions, particularly in sectors with high numbers of minimum-wage workers, like retail, hospitality, and care.

No Tax Increase for “Working People”

In a bid to provide stability for working individuals, the Budget confirmed that there will be no increases in key personal taxes:

• VAT (Value Added Tax) remains the same.
• Employee National Insurance rates stay fixed.
• Income Tax brackets remain unchanged.

This decision reflects the government’s focus on preserving the disposable income of working households amid challenging economic times. With inflation affecting purchasing power, the decision not to raise these taxes offers some relief to the general workforce.

Employer National Insurance Contributions

Employers will see an increase in National Insurance contributions (NICs), rising to 15% from April 2025. Additionally, the threshold at which employers start paying NI will be lowered from £9,100 to £5,000, a significant change intended to increase revenue.

• Revenue Target: This measure aims to raise £25 billion, which will help fund essential services and reduce the national debt.
• Impact on Businesses: While this will undoubtedly increase costs for employers, the government has introduced measures to mitigate its impact on small businesses, notably by raising the Employment Allowance to £10,500. This allowance increase will help smaller companies offset some of the added employer NI burden, particularly in sectors that are already financially stretched.

Capital Gains Tax (CGT) Rate Increases

The Budget has raised both the lower and higher rates of Capital Gains Tax:

• Lower rate: Increased to 18%
• Higher rate: Increased to 24%

These changes reflect the government’s intent to generate additional revenue from investments and asset sales. For property investors, landlords, and those selling high-value assets, these adjustments could mean a considerable increase in the tax payable on gains, especially with rising property values over recent years.

Reforms for Non-UK Domiciled Individuals

A major shift in the taxation landscape is the abolition of the remittance basis of taxation for non-UK domiciled individuals. Starting from 6 April 2025, a new residence-based regime will take effect, aimed at simplifying tax rules for international residents.

• Key Feature: Under this regime, individuals opting in will not pay UK tax on their foreign income and gains for the first four years of their tax residency.
• Impact: This approach is intended to make the UK a more attractive destination for international talent by removing the complexity of remittance-based taxation, potentially encouraging longer-term stays and investments from foreign residents.

Stamp Duty Changes for Additional Properties

In a bid to address housing affordability and cut down multiple property ownership, the government has raised the higher rates for additional dwellings in Stamp Duty Land Tax. This rate, applicable to second homes, buy-to-let properties, and properties bought by companies, will rise from 3% to 5%, effective immediately.

• Objective: The increase seeks to reduce the number of second homes and investment properties, potentially freeing up more properties for first-time buyers and primary residents.
• Implications: While this may make it costlier for investors and those looking to buy additional properties, it’s a positive move for prospective homeowners struggling with high prices in the housing market.

Welfare Reforms and New Cap

Looking toward the future, the Budget introduced a new welfare spending cap set for 2029-30.  By implementing stricter control measures, the government expects to save £4.3 billion per year. The welfare cap will primarily target reductions in fraud and error, reflecting a commitment to make the welfare system more sustainable without affecting those in genuine need.

Business Rates Relief for Key Sectors

The retail, hospitality, and leisure sectors, which have been particularly affected by recent economic challenges, will benefit from changes to business rates: The small business multiplier will remain frozen and from 2026-27, businesses in these sectors will receive a 40% relief on their rates bills.

This support aims to help these sectors recover and remain viable, especially as they continue to feel the effects of inflation and changing consumer spending habits.

Conclusion

The latest UK Budget introduces targeted measures designed to generate additional revenue, support lower-income workers, and provide relief to small businesses. By balancing increased taxes on certain types of income and assets while protecting the working population from direct tax hikes, the government aims to address pressing economic needs without overburdening households.

As the spring of 2024 unfolds, the Government have unveiled their budget, setting the stage for economic policies, social initiatives, and infrastructure development for the upcoming fiscal year. This pivotal moment not only reflects current priorities but also shapes the nation in the months and years to come. In this blog, we delve into some of the top topics emerging from the spring 2024 budget and their potential implications.

National Insurance

The main topic for the budget was the cut in national insurance again. The chancellor reduced the amount of national insurance employees would pay by 2%. The rate going from 10% to 8% in April 2024. It is estimated that the cut would be worth about £450 a year for someone on a £35,000 full-time salary.

It is estimated that around 29 million workers are set to benefit from the change. The rate of 'class 4' national insurance contributions, which is the main rate paid on self-employed profits of between £12,570 and £50,270, will be cut from 9% to 6% from 6 April. This rate had been due to fall to 8% from 6 April, but the chancellor has taken it one step further today. The self-employed will benefit too as the rate is slashed from 9% to 6%.

Housing

The chancellor confirms plans to scrap the furnished holiday lets regime. The initiative gives tax reliefs on properties being rented out to holidaymakers and make renting out to holidaymakers more profitable than to long-term tenants. The move is expected to raise £300m a year for the Treasury, however a blow to furnished holiday lets owners.

The chancellor also announced the government will reduce the higher rate of property capital gains tax. This is a tax paid on the amount of gain when selling a property. Currently the rate is 28% for higher rate earners, but this is being reduced to 24%

Business and Investment

The VAT registration threshold will be increased from £85,000 to £90,000 from the start of April. This change is estimated to help tens of thousands of businesses.

Benefits and Income Support

The Household Support Fund, which helps people struggling with cost-of-living pressures and was due to close in four weeks' time, will continue for another six months.

Full child benefits to be paid to households where highest-earning parent earns up to £60,000 - the current limit is £50,000. The top of a taper to withdraw the benefit will be raised to £80,000 from £60,000 at the moment.

The chancellor also announces a consultation on child benefit rules, to apply it to collective household incomes rather than for individuals from April 2026.

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As the clock ticks towards 01 April 2024, businesses across the nation are bracing themselves for the significant minimum wage increase set to come into effect. With no accompanying support from governments in these challenging times, the burden falls on the shoulders of businesses to adapt and plan effectively.

The Rise of Minimum Wage

As with every year, April 1st marks a pivotal moment as the minimum wage sees a substantial increase. Workers aged 21 and over will be entitled to the National Living Wage where currently it was workers aged 23 and over. While the intention behind such adjustments is to uplift low-wage workers and tackle income inequality, the reality for businesses is starkly different. For many, this hike presents a formidable challenge, with limited government assistance.

Financial stability is crucial to any business. It is extremely important that you protect and enhance it. Cashflow of your business is vital. You need to be aware of how much money is coming in and how much money is going out of the business. You will need to have a plan in place to cover any shortfalls.

Governments are having their own challenges and not always there to help us in a crisis, we have to stand on our own two feet, to see ourselves through these challenging trading times.

To stay on top of cashflow, it is best to speak to your accountant about cashflow projections. We have also got examples of how to get the best of cashflow on our website, click here to find out more.

We have examples of cashflow and budgeting here.

So, what can be causes of cashflow issues?

The number one issue we see is when a supplier has increased their prices significantly. This is when you need to decide if there is something you can scale back on or is it time to start shopping around. Talking to your suppliers if you notice increases, we’ve all been facing this over the past 18 months.

Track and monitor your costs, by carrying out management accounts, comparing this year with last year, you can see instantly what has changed for you and your business.

Late payments from customers can lead to cashflow issues too. This can sometimes cause tension as you do not want to ruin relations. The following tips can help tackle these issues;

·        Ensuring your invoices are accurate and on time can help avoid late payments.

·        Giving gentle reminders as it approaches credit term limits.

·        Providing easy payment solutions such as bank transfer or a direct debit system

·        Check your customers credit score, giving too much credit without looking into your customer bill paying activities can lead to bad debts.

·        Discounts for early payment to improve the timing of when the cash will be paid in can help too.

We all dislike to pay tax, but it is a part of life. Tax planning helps to keep your business financially healthy. We must ensure we have the funds to cover the tax payments. This is why it is crucial to work with your accountant so that you know well ahead of time how much your tax bill is. Not paying the tax bill in full and on time can add to the cost. Penalties and interest will incur and can make this less manageable.

There are allowances and reliefs out there to bring the tax bill down. Getting this done correctly will ensure that you pay the lowest but accurate amount over to HMRC.

Set up a savings account, and slowly build up the cash towards any tax bill, you don’t get surprises when its time to pay the bill then. Any surplus in that account, could pay for something you want.

Businesses that plan ahead, traditionally do better than those that don’t plan and work in the dark.