On Wednesday 6 March, Jeremy Hunt once again stood as Chancellor and delivered a budget to Parliament and the country. As expected, the Chancellor has found wriggle room in his fiscal rules that have allowed him to please his fellow Conservatives by reducing the impact of taxation. Not an unfamiliar tactic for a government in a general election year.
Rather than cover all the (very many) items, Chamber members are probably most interested in those announcements which directly affect them, their businesses and the impact on future business.
National insurance
As has now become common, some of the announcements make headline news before the budget. This was no exception. The reduction in National Insurance Rates for the employed and self-employed was further reduced by 2%. The standard rate of national insurance was 12% before November’s Autumn Statement, had already been cut to 10%, and has now been announced to fall to just 8% from April 2026. For self employed individuals this will be just 6%
For the average employee, this is a significant reduction for employees who should benefit to an average of £450, and self employed workers by £650.
Thresholds
One area of personal tax that was not eased in the Budget announcements was the fiscal drag created by the freezing of the Income Tax personal Allowance and High Income Threshold.
The Income Tax Personal Allowance (presently £12,570) and the higher rate threshold (presently £50,270) above which you will pay Income Tax at 40% not 20%, have not seen a significant increase for over four years.
In the same period, the Consumer Prices Index (CPI) has increased from 108 to 132. To keep pace with inflation, based on the CPI increase, a £45,000 salary in April 2020 would now need to be £55,000 to maintain the same purchasing power. And as the higher rate threshold has remained unchanged, at £50,270, the top £4,730 will be taxed at 40% not 20%.
Based on the CPI change, the present Personal Allowance should be circa £15,400 and the Higher Rate threshold £61,400 to maintain their monetary value.
The Income Tax Personal Allowance and Higher Rate Threshold will remain unchanged and has been announced not to be reviewed again until April 2028.
National Minimum Wage
From April, the national minimum wage for those aged 21 and over will rise to £11.44 as part of the National Living Wage changes. This will little doubt have a significant impact on how much businesses pay all their employees, not just those legislatively impacted by the change.
Child Benefit
A particularly disliked tax which can impact on single earning households more significantly than households earning more. The new threshold at which the benefit is tapered will now rise to £60,000 and reduce over earning s up to £80,000
VAT
After a seven year hiatus, the VAT registration threshold was finally raised, but from £85k to just £90k.
Whilst the Treasury suggest this will remove 28,000 small businesses from VAT, it strikes me that the impact of inflation over the last two years will already have brought many more businesses into VAT registration. Going forward, given that the government want these businesses to grow, the hope must be that these businesses that initially fall out of registration may actually return in the near future.
Corporation tax
Corporation tax rates were unaffected by the budget. The main rate will stay at 25% with the reduced small profits rate at 19%.
Capital gains tax
After rumours for previous fiscal events (budgets) of capital gains tax increases, capital gains tax for residential property gains is being reduced from 28% to 24% from 6 April 2024. The lower rate of 18% will remain for those gains that fall within the basic rate tax band.
Abolition of the Furnished Holiday Lets (FHL) tax regime
However, to counter the above capital gains tax reduction on one form of property, the present favourable tax benefits of letting properties as short-term holiday lets is to be abolished from April 2025.
Draft legislation will be published at a future date and will include an anti-forestalling rule, but overall the announcement has the potential to further reduce the returns from a second property, a sector which has already been significantly affected in recent years.
There were lots of other tweaks and announcements, including to multiple dwelling stamp duty, non-dom status and energy profits levy, vaping duty but my expectation is that the details of these are less attractive to Chamber members.
If you have any specific queries, then please do seek specialist advice from an appropriate advisor.
