The changes implemented by the Chancellor in the Spring Budget 2024 have significant implications for small businesses, highlighting the need for a timely review of tax affairs to ensure readiness for the fiscal period 2024-2025.

Reduction in National Insurance Contributions:

Since April 6, 2024, there has been a reduction of 2 pence in National Insurance contributions (NICs) for both employees and the self-employed. Employees' NICs have decreased to 8%, while self-employed NICs have reduced to 6%, following previous cuts in the Autumn Statement of 2023, amounting to a one-third decrease in National Insurance. Additionally, from April 2024, self-employed individuals are not required to remit Class 2 NICs, simplifying the NIC structure for this group.

Reduction in Dividend Allowance:

The tax-free dividend allowance has been halved from £1,000 to £500 from April 6, 2024, following a prior reduction from £2,000 to £1,000 in April 2023. Limited company owners may need to re-evaluate their remuneration strategies in response to these adjustments.

Increase in VAT Registration Threshold:

From April 1, 2024, the VAT registration threshold has been elevated to £90,000, with a corresponding rise in the deregistration threshold to £88,000. Although this change is expected to exempt approximately 28,000 businesses from VAT obligations as mentioned in the Budget, careful consideration of VAT registration remains imperative, necessitating expert assessment of various operational and financial factors.

Raising the threshold for Child Benefit:

The threshold for claiming child benefit has increased to £60,000, with the upper limit of the tapered range rising to £80,000, alleviating the burden for many employed and self-employed parents.

Increase in Minimum Wage:

From 06 April 2024, the new rates are £6.4 per hour for employees below 18 years old and for apprentices, £8.6 per hour for employees aged 18 to 20 and £11.44 for 21 years and above. Additionally, the qualifying age for the National Living Wage has been lowered from 23 to 21. Employers need to review their payroll systems diligently to ensure compliance with these updated wage rates and age thresholds. These revisions emphasise the importance of staying informed and proactive in managing payroll obligations.

Reform of Research and Development Tax Reliefs:

From April 2024, the system of corporation tax reliefs for research and development (R&D) has undergone simplification into a unified R&D Credit. These changes, while primarily beneficial for large corporations, hold significance for qualifying SMEs, necessitating a thorough understanding of the revised rules, and reporting requirements.

Adjustments to Capital Gains Tax:

Effective from April 6, 2024, the higher Capital Gains Tax rate applicable to residential property transactions is decreased to 24%. Additionally, the annual exempt amount for Capital Gains Tax has been permanently set at £3,000 for individuals, marking a downward adjustment from previous levels.

Changes in Business Rates:

The government has announced the continuation of the freeze on the small business multiplier at 49.9p and an extension of the RHL Business rates relief Scheme (Retail, Hospitality and Leisure), offering a 75% relief up to £110K per business. These adjustments highlight the importance for eligible businesses to conduct a comprehensive assessment of their business rates implications to ensure compliance and maximise available relief opportunities.

Implementation of Cash Basis Accounting:

Effective from April 6, 2024, the cash basis has become the default method for calculating profits of eligible sole traders and partners with trading income. Removal of the £500 annual cap on interest deductions and relaxation of size thresholds for utilising the cash basis accompany these modifications, emphasising the need for careful evaluation of accounting methods.

Additional Tax Year Measures:

Various additional tax year measures encompassing provisions related to the UK Independent Film Tax Credit, Empty Property Relief, and other initiatives reflect the evolving tax landscape. Taxpayers must gain a thorough understanding and engage in strategic planning to navigate this fiscal period.

Conclusion

These significant changes demand diligent review and proactive measures from small business owners and the self-employed. It is crucial to engage with experts to fully grasp the implications of these revisions and develop tailored strategies to ensure compliance and leverage opportunities in the evolving tax landscape.