Spring Budget 2024: The reaction

By Nick Batten on 7 March, 2024

Yesterday (6th March) Chancellor Jeremy Hunt presented his 2024 Spring Budget, with one of the key announcements being the cut to workers’ National Insurance by another 2p – meaning a fall from 10 per cent to 8 per cent.

Other significant announcements included new tax reliefs and investments to help establish the UK as a world leader in high-growth industries such as the creative sector, advanced manufacturing and life sciences, while 28,000 SMEs will be taken out of VAT registration altogether – encouraging them to invest and grow.

A selection of local and national experts share their thoughts…

Dave Southby, Founder of Dave Southby Financial Planning

“The Chancellor made a point to highlight that inflation should be below the Bank of England’s target annual inflation rate of 2%. This is very promising for the overall economy, with the OBR predicting the UK economy to increase by 0.8% this year and 2.9% next year. 

“These announcements will only put more pressure on the Bank of England to start easing their monetary policy and reduce interest rates. Any reduction in interest rates will be beneficial to people with borrowing but will have a negative impact on saving rates.

“I welcome the decision to further reduce National Insurance rates for both employed and self-employed people. I did expect them to review the Personal Allowance threshold, however the government obviously voted to reduce National Insurance rates instead.

“Another welcome announcement was the increase in the VAT threshold. I know this increase doesn’t seem significant, but it will help many small businesses.

“I’m interested to understand more about the government’s plans to revise the Child Benefit system. On the surface their initial increase to the Child Benefit higher earnings threshold from £50,000 to £60,000 will mean thousands of families will be better off however for me there are question marks around the future plans, particularly the implementation of the ‘household earnings threshold’. I think the principle of it is great, but it will be interesting to see how it is facilitated and what the threshold will be. 

“The introduction of the British ISA! A scheme designed to encourage investment into British businesses with an additional £5,000 allowance above the usual £20,000 annual ISA allowance. I think this is a fantastic incentive to boost British focus investments and gives people the opportunity to invest more in ISAs each year.”

Rashik Parmar MBE, Chief Executive of BCS, The Chartered Institute for IT 

 “This level of investment in technology across the NHS and the police is vital to improve the quality and speed of the medical service and criminal investigation.

“But funding for AI must include investment in digital professionals – people – who will work with it and lead it at all levels. They need not just high degrees of competence, but an understanding of ethical principles, which are key when using automated technology that affects our lives, like processing patient data, or responding to emergency enquiries.

“We need the public to trust that the UK’s journey to become the next Silicon Valley will make their lives better, knowing it is delivered by accountable experts who meet independent standards.”

Phil Smith, Managing Director, Business West

“The budget offers some initiatives that we expect our region’s businesses will benefit from. The creative and hospitality industries, which are significant contributors to the South West’s economy, should welcome the Chancellor’s specific tax measures to support them. We also welcome the news that the government has reached agreement with Hitachi to purchase the Oldbury-on-Severn site in South Gloucestershire. Development of this site could generate thousands of jobs and help boost the economy. It also further underscores our region as a clean energy hub.

“For the South West SME, the recovery loan extension should help those navigating challenging times, and some should benefit from the change in the VAT threshold. 

“However, what the region is still lacking is a long-term strategy that helps support a strong economy, and our businesses and communities to thrive. We need initiatives that address fundamental structural issues, such as low productivity and sluggish growth. We know our region’s businesses want significant action on key issues like transport, housing and infrastructure, something that was lacking in this spring budget.” 

Liz Hutchings, Founder of Total Guide

“The National Insurance cut will help the staff make savings as well as the business which means we can reinvest in further growth and the support for working parents with 30 hours’ free childcare for parents of under 5s will be fantastic but still a little way off yet and it’s too little too late for many including myself. 

“Being a digital business, I was encouraged to hear the emphasis on making the UK the ‘new Silicon Valley’ and the support and investments in digital, tech and AI start-ups and businesses is encouraging. 

“The increase in the VAT threshold will help a lot of micro-businesses invest in growth instead of worrying about paying VAT. 

“I was hugely disappointed not to hear much help for the leisure and hospitality industries, with the cost of living and the rise in national minimum wage, this sector is still in dire need of help and it’s been very sad to see many businesses in this sector close down this year.”

Emma Skinner, Associate Partner, Haines Watts (Swindon)

“The VAT registration threshold increase to £90,000 following a seven-year freeze will help lots of small businesses approaching the registration threshold. However, it is difficult to argue it fully compensates for the threshold being static for seven years. There was also no mention of changes to the de-registration threshold (currently £83,000) – which could lead to some businesses being caught in the middle.

“The top rate of capital gains tax (CGT) on residential property is being cut to 24% – it is important to note that this tax only applies when disposing of a property that is not your home. 

“The child benefit system is set to be reformed by April 2026 to assess household income, rather than on an individual basis which was stated as ‘unfair’. In the short term, the threshold will increase to £60,000. The top of the taper at which the benefit is withdrawn will increase to £80,000 (currently £60,000). 

“A household income assessment seems to be a fairer approach considering two parents could earn £49,000 each and receive full child benefit whereas one parent in another family could earn £60,000 (higher rate taxpayer), their partner is a stay-at-home parent and the family gets nothing. 

“National Insurance rates are being cut to 8% for employees and to 6% for the self-employed. This will increase the ‘take home’ position – who doesn’t love a tax cut? However, the 4% current inflation rate does need to be considered alongside this.”

Rob Stokes, Director, Optimum Professional Services

“There were very few surprises and those measures designed to help businesses or put money into people’s pockets were limited.

“There had been calls to increase the VAT threshold to £100,000, but the Chancellor stuck at increasing it by only £5,000 to £90,000. This won’t be enough to encourage those businesses, like trades, who don’t want to register for VAT and have to charge 20% more to their customers.”

“The cut to National Insurance was well-publicised, dropping from 10 per cent to 8 per cent for paid employment; for the self-employed from 8 % to 6 %.

“However, this will only give PAYE earners on the average salary another £450 a year, so it’s very little to write home about. For drivers, the 5p cut to fuel duty frozen for another 12 months is welcome but, again, only saves on average £50 a year.

“The Chancellor’s plans to encourage investment, with planned changes to leased assets could be interesting, but it is essential to see the detail and timescales.”

Dominic Bourquin, Head of Tax Consultancy & Corporate Finance and Partner for Monahans 

“The Chancellor started his budget briefing with a welter of fiscal updates on growth spending and government debt. Frankly, it contained a bewildering volume of statistics, but hidden within all that bluster, there were some genuinely welcome measures and some clearly politically motivated measures too.

“The difficulty with this budget is lack of room to manoeuvre. One of the main announcements that we will see hitting the headlines is the cut in National Insurance Contributions (NICs) paid by 27 million workers across the UK. NICs have been cut by 2p – dropping from 10% to 8% for employees (8% to 6% for the self-employed) and costing around £10 billion. Whilst this doesn’t represent a major cut, and does not fully compensate for fiscal drag, ultimately, we would all agree that we would rather have the cut than not.

“Whilst the abolition of the furnished holiday lets regime, rise in duty on vapes and tobacco and the new changes to the non-dom regime, will amount to a significant figure, it still leaves Hunt £5 billion short to fund his proposed NIC cut. As a result, the government will likely find itself in slightly more debt than it otherwise would have been at the end of the forecast period, which is about another five years down the line.

“With this in mind, I don’t think the Chancellor has necessarily wholly funded his 2p reduction in NIC. However, we must put this into perspective as we know pretty much every threshold has been frozen including the personal allowance, higher income tax rate threshold and inheritance tax bands. This means there is a lot of money being funnelled into the Treasury by fiscal drag. We know we would be better off if we didn’t have the fiscal drag hanging over us but we will be slightly better off with minor cuts to NICs than we would be without them, so we have to recognise the small wins.

“The extension to the freeze on fuel duty for another 12 months will come as a welcome measure with many essential cars, vans and lorries on the road for school drop offs, work commutes and goods deliveries. A huge number of businesses continue to rely on their fossil fuel transport and with no inexpensive electric alternatives on the market, those cars, vans and lorries do need to be used as it’s the only cost-effective option.

“There was positive news for parents, with the Chancellor’s plans to increase the level at which people can claim child benefit, delivering a change that the country has long been waiting for. Previously, the benefit started to be withdrawn when one parent earned more than £50,000 a year but the threshold will rise to £60,000 from April – some small assistance to a number of families trying to balance the books when dealing with the rising cost of living. The benefit used to be withdrawn on a tapered basis in an income band between £50,000 and £60,000, but this will now only occur between £60,000 and £80,000 until it is replaced by what has been called the household basis in 2026 – details to follow which does make us nervous!

“The Bank of England’s ambitious 2% inflation target seems within range within months according to the Chancellor which is promising for households and the overall level of the cost of living. Those coming to the end of their fixed rate mortgages will hopefully begin to see the light at the end of the tunnel, when their potential replacement mortgages aren’t quite so highly priced.

“The support announced for SMEs is cautiously welcomed but I would have liked to have seen a doubling of the VAT registration threshold from £85,000 to £170,000, rather than a measly increase of £5,000 which does not give small businesses much incentive to grow before having to hike their prices by 20% VAT.”

David Jinks M.I.L.T, Head of Consumer Research, ParcelHero

“This was the Budget that wasn’t, as far as many small businesses are concerned. Hundreds of SME retailers and local companies were waiting desperately for urgent reforms to their business rates, as well as specific tax cuts for those in the hospitality sector and on foreign tourists’ retail spending. It’s distressing that none of these widely expected reforms actually happened.

Business rates reform

“The Government has again failed to tackle business rates reform, leaving many retailers and businesses in a state of limbo. Businesses will find it hard to plan for the future until there is a proper solution to the vexed issue of rates. There was a woolly reference to further business rates support, together with £200m more for the post-pandemic Recovery Loan Scheme/Growth Guarantee Scheme. That’s not enough. 

“Business rates are charged on shops, pubs and other business properties based on their rental value. They devour a significant amount of most local shops’ annual turnover. News that film studios in England will get 40% relief on their gross business rates until 2034 is welcome but will do little to help our favourite local High Street stores. 

Tourist Tax

“The Chancellor also pointedly ignored calls from retailers and business leaders to reinstate VAT-free shopping for overseas tourists. Tourists from overseas were allowed to reclaim the 20% VAT on their purchases in the UK until January 2021, when the tax break was scrapped by then-Chancellor Rishi Sunak. This has resulted in lost income for many stores in tourist areas and has impacted the entire tourism industry.

Hospitality tax cut

“Hospitality businesses had been calling for a cut to the 20% rate of VAT charged on pubs, bars and restaurants. The sector’s recovery from the pandemic has faltered significantly in recent months. Many industry leaders had called for a reduction back to the previous 12.5% rate that had helped businesses recover from the Covid crisis. The freeze on alcohol duty will be welcomed but won’t be enough to save many of our favourite pubs and eateries.

“Of course, there was some good news for Britain’s small traders and manufacturers. The threshold for VAT registration will go up from £85k to £90k. That’s not as far as the £100k some were hoping for, but it’s still good news for many smaller traders.

“Back in his Autumn Statement, Mr Hunt unveiled a £10bn tax cut for businesses that make capital investments in the UK, known as “full expensing”. Now, following calls from business lobbying groups, he’s revealed that firms will be able to claim tax relief for leased assets as well. However, he ominously added “as soon as the Government can afford to do so”.

“The £270m to advanced manufacturing industries, to grow “zero emission vehicle and clean aviation technology” will also be good news for businesses such as courier companies that are keen to further decrease their carbon footprints.

“However, this was the Budget of what was not announced, rather than what was. As such, it will do little to increase the confidence of SME retailers, manufacturers and other businesses, as customers continue to struggle with the cost of living.”

Dr Joe Marshall, Chief Executive of the National Centre for Universities and Business (NCUB)

“In today’s Budget, the Chancellor rightly acknowledged that research, innovation and skills are central to leading the UK into a more optimistic, prosperous age. However, there were no bold, new announcements to truly shift the dial and drive growth through a more innovative, highly skilled economy. Previous commitments to grow public research funding and release more private sector investment are critical, but further intervention is needed to put university funding on a more sustainable footing. Only then will we build, grow and attract further private investment into the UK.

“Last week revealed that business research and development (R&D) investment in the UK dropped by 0.4% in real terms between 2021 and 2022. It is therefore clear that existing measures alone do not go far enough to realise the UK’s Science Superpower ambitions and for the nation to reap the rewards of more jobs, more innovative and productive industries, as well as greater prosperity, security and sustainability. The UK’s Science Superpower ambition is not an obscure or remote vision but represents the UK’s fundamental plan for growth intended to deliver a tangible, positive impact on peoples’ lives, and prepare for a radically different future in the fourth industrial revolution.

“To unlock economic growth, it is vital that the Government sets an ambitious target and plan to raise private R&D investment. The Government must not forget their commitment to making the UK a Science Superpower. We need action now if we are to continue to build to secure a central role in the age of innovation.” 

Pictured: (top of page) Image by PublicDomainPictures from Pixabay