Spring budget 2024
The key announcements from Jeremy Hunt’s spring budget last week were as follows:
Impact on businesses
The VAT registration threshold will increase by £5,000 from £85,000 to £90,000 from 1st April 2024.
Millward May: This will provide a bit of extra headroom to clients with sales approaching the VAT threshold. It is important to monitor your sales on a monthly rolling basis if you feel your business may be approaching this threshold. You can do this easily on your bookkeeping software. If you are unsure how to do this, don’t hesitate to get in touch.
Corporation tax rates on your company profits will remain unchanged;
19% => £0 - £50,000
26.5% => £50,000 - 250,000
25% => £250,000+
Its also important to be aware of the associated companies rules - further details can be found here: www.millwardmay.co.uk/news/2023/5/18/corporation-tax-changes
Millward May: Where you have profits exceeding £50,000 you may want to consider ways to reduce this and therefore bring down the profits in the 26.5% rate (e.g. you could make pension payments or purchasing a large fixed asset such as an electric vehicle before your period end). We can help our clients if they require advice on this.
National Living wages will rise to £11.44 per hour from April 2024.
Millward May: We advise all employers to check you are paying the correct amounts to your employees. You can use the government calculator here: https://checkyourpay.campaign.gov.uk/. If you have any questions or concerns, you can email our payroll team at payroll@millwardmay.co.uk
Research and Development reforms will come into place from April 2024. The RDEC and SME schemes will be merged and the rate will be set at 20% which is the current RDEC rate.
Impact on individuals
Class 1 employee National Insurance Contributions (NICs) are to be cut from 10% to 8% from 6th April 2024. This will provide a saving to those who are on a salary above £12,584, the threshold at which employees start paying National Insurance.
Millward May: We will be reviewing salaries for our director/shareholder clients in the next month and advise accordingly.
Class 4 NICs are to be cut from 9% to 6% from 6th April 2024 which will be a welcome change for self-employed individuals.
The income threshold at which Higher Income Child Benefit Charge (HICBC) starts to be charged has increased from £50,000 to £60,000. Additionally, the rate at which the HICBC is charged will be halved which means that it will not be withdrawn completely until individuals have income of £80,000 or more.
Millward May: Those who decided not to claim this in the past due to the charge being the same as the benefit may now decide it is beneficial to do so. We would recommend speaking to us if you are unsure as it will depend on individual circumstances.
The Capital Gains tax rate on residential properties has been reduced for higher rate taxpayers from 28% to 24% from April 2024. The basic rate remains unchanged at 18%.
Millward May: If you are considering selling your rental property then we offer an additional service to calculate the potential capital gains tax arising for existing clients.
The Furnished Holiday Lettings (FHL) tax regime will be abolished from April 2025. Holiday lets will then be treated in the same way as other residential lets.
Income tax rates will remain unchanged:
Basic rate – 20%
Higher rate – 40%
Additional rate – 45%
The personal allowance and basic rate limit are fixed at their current levels of £12,570 and £37,700 respectively and the point at which higher rate starts remains at £50,270.
Dividend tax rates will remain unchanged:
Basic rate – 8.75%
Higher rate – 33.75%
Additional rate – 39.35%.
As previously announced the dividend allowance will reduce from £1,000 to £500 from April 2024.
Class 2 National Insurance for the self-employed with profits over £6,725 will no longer be payable from 6 April 2024, saving £163.80 per annum. Those with profits under £6,725 who pay voluntarily will continue to be able to do so in order to access the benefits including the state pension at £3.70 per week from April 2024.
Pension changes previously introduced in 2023/24 will remain including:
An increased annual allowance of £60,000
Individuals with a “threshold income” over £200,000 will have their allowance restricted. It will be reduced by £1 for every £2 of “adjusted income” over £260,000. The minimum allowance is £10,000.
The lifetime allowance has been abolished from 2024/25.
Millward May: We would recommend speaking to an Independent Financial Advisor if you are a higher rate taxpayer and would like to ensure you are maximising your tax efficiency via pensions. You can find out more here: www.millwardmay.co.uk/independent-financial-advisor
Capital gains tax annual exemption will reduce from £6,000 to £3,000 from April 2024 as previously announced.
Millward May: You may want to consider timing the sale of any shares/property to take advantage of the higher allowance this tax year ending 5th April 2024.
Making Tax Digital for small businesses will still come in from April 2026. The threshold at which this applies to small businesses and landlords is £30,000 and will be reviewed in future.
Millward May: We would recommend using bookkeeping software for your sole trade or Limited Company business. You can still get FreeAgent for free if you have a Mettle or Natwest bank account. A Mettle bank account is also free! We can help setup the software for our monthly fee clients for no additional charge.