Spring Budget 2024 – summary for SMEs

The Chancellor delivered a budget focused on 'working families' and 'business growth'. The headline measure was a further 2p cut to the main rate of employee National Insurance, taking it down to 8%.

Crucially for small businesses, the VAT registration threshold was increased from £85,000 to £90,000, the first increase in seven years, providing much-needed breathing space for firms near the limit.

VAT threshold increase

The increase in the VAT registration threshold to £90,000 (and the deregistration threshold to £88,000) is a welcome relief for many small businesses, particularly those in the service sector. The previous freeze at £85,000 had created a 'cliff edge' effect, discouraging some sole traders from taking on more work to avoid the administrative burden and pricing impact of charging VAT. While a £5,000 increase does not fully account for recent inflation, it provides a valuable buffer.

National Insurance cuts

The reduction in employee National Insurance from 10% to 8% builds on the cuts announced in the previous Autumn Statement. For the self-employed, the main rate of Class 4 NICs was also reduced further, dropping from 8% to 6%. These cuts aim to stimulate economic activity by increasing take-home pay, though they must be viewed in the context of the ongoing freeze to personal tax allowances.

Property tax changes

The Budget also included significant changes to property taxation. The higher rate of Capital Gains Tax on residential property was reduced from 28% to 24%, aiming to encourage landlords to sell properties and increase housing market liquidity. Conversely, the Furnished Holiday Lettings tax regime and Multiple Dwellings Relief for Stamp Duty Land Tax were both abolished, representing a tightening of the rules for property investors.