Budget 2024: What small businesses need to know

Chancellor Jeremy Hunt has announced his 2024 Spring Budget, to which a panel of small business owners and experts reacted live.

Here's everything small business owners need to know about the announcements.

VAT thresold increase

The threshold at which small businesses must register to pay valued added tax (VAT) will be increased from £85,000 to £90,000 on 1 April. The Treasury claimed the change will take around 28,000 small businesses out of paying VAT altogether. It's the first time the threshold has been increased since 2017.

The VAT de-registration threshold will increase from £83,000 to £88,000. This means that if your VAT sales drop below that level you can de-register.

Recovery Loan Scheme extended and renamed

The government's Recovery Loan Scheme (RLS), originally introduced in 2021 to help small and medium sized businesses deal with the impact of coronavirus, is being extended until 31 March 2026 and renamed the Growth Guarantee Scheme. The Treasury said the extension will help 11,000 SMEs to access funding.

Through the scheme, the government guarantees to the lender 70% of up to £2m provided to businesses with a turnover of no more than £45m.

National Insurance cuts

The main rate Class 4 National Insurance Contributions (NICs) for the self-employed will be cut by 2p from April 2024, reducing the rate from 9% to 6%. The government said that combined with the abolition of Class 2 NICs announced in the 2023 Autumn Statement, the average self-employed person on £28,000 will save £650 a year.

The government is also cutting the main rate of employee National Insurance by 2p from 10% to 8% from 6 April 2024. Combined with the 2p cut announced at Autumn Statement 2023, the government said this will save the average worker on £35,400 over £900 a year.

Find full details on the National Insurance changes here.

SME Business Energy Advice Service

The government said it is looking at the findings of the SME Business Energy Advice Service (BEAS) pilot in the West Midlands with a view to potentially expanding the scheme nationwide.

BEAS offers free energy assessments and energy efficiency grants to small businesses.

Creative industries tax relief

The Budget made various annoucements for the creative sector.

• A new UK Independent Film Tax Credit at a rate of 53% for films with budgets under £15m that meet the conditions of a new British Film Institute test.

• A 40% relief on gross business rates bills for eligible film studios in England, until 2034.

• Higher rates of tax reliefs for theatres, orchestras, museums and galleries will be permanently set at at 40% for non-touring productions, and 45% for touring productions and all orchestra productions.

• A 5% increase in tax relief for UK visual effects costs in film and high-end TV, under the Audio-Visual Expenditure Credit (AVEC).

• Removing the 80% cap for visual effects costs in the Audio-Visual Expenditure Credit.

Alcohol duty frozen

Alcohol duty will be frozen until 1 February 2025. The government said will result in 2p less duty on an average pint of beer, 1p less duty on an average pint of cider, 10p less duty on an average bottle of wine, and 33p less duty on an average bottle of spirits.

Fuel duty frozen

The rates of fuel duty will remain at the current levels for a further 12 months by extending the temporary 5p cut and cancelling the planned increase in line with inflation for 2024-25. The government said the average car driver will save £50 in 2024-25.

Furnished holiday lettings tax regime abolished

From 6 April 2025, the system which gives tax benefits to people who let out a property as a holiday home rather than a long-term let will be scrapped. This means short-term and long-term lets will be treated the same for tax purposes.

Child benefit reform

The government will increase the high income child benefit charge (HICBC) threshold to £60,000 from April 2024. Currently the charge is introduced when one parent has taxable income of £50,000 or more. The rate at which HICBC is charged will also be halved so that child benefit will not be fully withdrawn until a parent is earning £80,000 or more.

Campaigners have complained it is not fair that a household with two parents each earning £49,000 a year receive child benefit in full, but a household earning less overall but with one parent earning over £50,000 see some or all of the benefit withdrawn.

New UK ISA

A new UK ISA will provide a £5,000 annual ISA tax-free allowance in addition to the existing £20,000 for people who invest in "UK-focused assets". The government is consulting on the details.

AI Upskilling Fund for small businesses

The government will pilot a new £7.4m fund to "help SMEs develop AI skills of the future"

UPDATE 15/03/24:

The government has published more details about the AI Upskilling Fund.

The fund is for small and medium-sized enterprises in the professional business services sector for training which supports employees to develop their technical skills and/or understanding of AI to be able to develop, deploy, or use AI in their role. It is a 50% match funded scheme with £6.4m of grant funding available in the financial year 2024-2025.

The fund will open for applications in May but businesses can register their interest here.

Enterprise Nation report: What UK entrepreneurs really think about artificial intelligence

Tax simplication for small businesses

In the full Budget document, the government announced "metrics to track progress being made in simplifying the tax system, especially for small businesses and individuals, with a view to reducing business burdens over time".

It said it will:

• track the views of small businesses and individuals on the ease of dealing with tax issues, and the ease of finding information.

• measure how easy taxpayers found it to deal with HMRC.

• monitor HMRC’s estimate of the net change in cost to businesses of meeting tax obligations from fiscal event measures.

The government said it will also remove confusion around Income Tax Self Assessment by simplifying access to digital services for those who want to pay in instalments in advance via a Budget Payment Plan, or in arrears via a Time to Pay Arrangement from September 2025.

Reversal of high net worth worth/sophisticated investor changes

The government will reinstate the previous eligibility criteria to qualify as a high net worth or sophisticated investor.

New rules were introducted on 31 January that changed the criteria to qualify as a high net worth Individual from an annual income of £100,000 and a net assets value of £250,000, to an annual income of £170,000 and net assets valued at £430,000.

Several entrepreneurs, investors and business groups protested that the changes had the potential to negatively impact the availability of finance for start-ups with female and unrepresented entrepreneurs the hardest hit.

HMRC guidance on training as an allowable expense for self-employed

Alongside the Budget, the government published new guidance around the self-employed claiming training an allowable expense to reduce their tax payments. The guidance outlines scenarios when the cost of training is likely and unlikely to be an allowable expense.

Non-dom rules

The current tax rules for non-UK domiciled individuals (non-doms) will be abolished and replaced with new rules from April 2025.

The government said "this will ensure that all UK residents who stay in the UK for over four years will pay the same tax on their foreign income and gains, regardless of their domicile status, creating a modernised regime that is simpler, fairer and more competitive".

Vaping duty

The government said it will introduce a new duty on vaping products in October 2026, with a consultation on the design implementation of the duty.

Regulating tax advisers

The government announced a consultation on two potential changes “to raise standards in the tax advice market”:

• exploring a proposal to require tax advisers to join a professional body.

• requiring tax advisers to register with HMRC if they wish to interact with HMRC on a client's behalf.

Investment zones

The government announced details of how new investment zones in Greater Manchester, Liverpool City Region, North East of England, South Yorkshire, West Midlands and West Yorkshire will use the £160m they are each due to receive. It includes offering tax reliefs to attract businesses, and investments in areas including skills, research and innovation, and infrastructure.

Support for agri-food businesses

Following Launchpad pilots in Liverpool and Tees Valley and eight projects announced in October last year, a new agri-food Launchpad in mid and north Wales is being launched with Ceredigion Council and the Welsh government.

The Innovate UK Launchpads programme supports emerging clusters of SMEs through funding, wrap-around support and networking opportunities to help businesses innovate and grow.

Enterprise Nation's reaction

Emma Jones, Enterprise Nation founder, said:

"This was a budget for a general election, not for small business growth.

"Enterprise Nation welcomes the OBR's forecast that inflation will fall below 2% in the coming months. This will provide some relief to small businesses who have been struggling with rising costs.

"We are pleased to see measures to support SMEs, including the £200m extension of the Recovery Loan Scheme, and the new British ISA is also an innovative step that could boost investment in UK businesses and assets.

"The government's Public Sector Productivity Plan has the potential to create more opportunities for small businesses to win procurement contracts, we'd like to see the roll-out plan to ensure innovative small businesses can benefit and contribute.

"And the 2% cut in national insurance announced in April will put more money back into the pockets of working people and the self-employed, boosting consumer spending power.

"But more direct action is needed to tackle the key issues holding back small businesses. Late payment remains a major crisis, with many businesses struggling with poor cash flow as a result of being paid late. More action is needed to tackle this.

"We believe this was a missed opportunity to provide a vision of growth for small businesses, which have been struggling against many challenges in recent times. Founders have unrealised potential to sell, export, hire and innovate, but they need a rallying cry to inspire them. Today's Budget did not provide that.”

Small business reaction

Dr Sarah Welsh, Enterprise Nation member and co-founder of femtech firm Hanx, said:

"We love the ambition for the UK to become the next Silicon Valley and to nurture and retain entrepreneurs to stay in the UK as they scale. However, that requires a mindset shift on the side of VCs and business support to encompass a broader range of industries that are investable. For instance, Europe and US are far more open to funding ‘taboo’ sectors such as sexual wellness.

"Additionally, businesses in women’s health tend to be founded by female, and underrepresented, founders. The Rose Report stated that £250 billion of new value could be added to the UK economy if women started and scaled new businesses at the same rate as men. We’d like to see greater support for very early stage and first-time entrepreneurs to drive innovation across a broader, more inclusive, range of industries."

Keisha Shah, Enterprise Nation member and founder of Teddo Play, said:

"I would have liked to see the revival of the Tier 1 visa which closed back in 2011 and hasn't opened since. Thanks to that high-skilled high talent visa back in 2010, we were able to move to the UK to make a life here and make a positive difference in the country. The Australian points-based visa system should be taken as a reference point to encourage high-skilled migration."