Despite being set against the backdrop of the UK having recently entered a technical recession, defined as two-quarters of a decline in GDP, the accompanying OBR forecasts released during the spring Budget predicted that inflation will fall below 2% over the next few months.

This allowed the Chancellor to introduce a range of new tax-cutting measures to try to reposition the UK as a high-skilled, high-wage economy.

We’ve picked out the key points relevant for SMBs so accountants and bookkeepers are best placed to advise their clients on incoming changes.

Taxes

National Insurance Cut

From 6 April, Class 4 National Insurance Contributions (NICs) for self-employed individuals will be reduced from 9% to 6%.

This is in addition to the already announced abolition of Class 2 NICs, which will be scrapped at the same time. 

Individuals with profits of £75,000 will save over £1,300 once changes are reflected.

There are also incoming changes to employee NICs. However, these won’t affect the payroll of clients because they are deducted from the pay packets of employees.

VAT Threshold Increased

From 1 April, the VAT threshold will increase from £85,000 to £90,000. This will be the first time it has been raised since 2017.

It’s encouraging to see the threshold raised, but its marginal increase is unlikely to offset many smaller businesses getting dragged into exceeding the uplift due to inflation.

Thankfully, the Making Tax Digital (MTD) rollout and wider adoption of cloud accounting software have made VAT administration easier and cheaper to deliver to clients.

New British ISA

The Government will create a new British ISA allowing individuals to invest up to £5,000 in qualifying UK businesses.

This allowance will be separate from the £20,000 limit available to invest in other ISA products.

Similar to other ISA products, investments can grow tax-free and are exempt from capital gains while they are maintained inside a tax wrapper.

While the British ISA has yet to be launched, accountants should flag its availability for business owners who may already be utilising the full existing main ISA allowance in a personal capacity.

Sector Specific Tax Measures

Hospitality and Alcohol Producers

Alcohol duty will be frozen until 1 February 2025, an extension of six months from previous announcements. 

Clients serving alcohol in the hospitality sector may want to maintain or increase consumer pricing to take advantage of this measure and protect their revenues.

Similarly, this will be beneficial to producers of alcohol who export their products overseas, as well as selling nationally.

Creative Industries

In a boost to the film industry, the new UK Independent Film Tax Credit (IFTC) will enable filmmakers to opt in to claim a 53% tax reduction on qualifying expenditures. 

To be eligible, the production budget of films cannot exceed £15m. 

Business Support

Recovery Loan Scheme (RLS) Extended

The Recovery Loan Scheme, introduced in 2021 to aid covid recovery, is being extended for an additional two years, to 2026 and has now been renamed the Growth Guarantee Scheme.

Under the initiative, the Government guarantees 70% of loans up to £2m for companies with a runover of less than £45m.

This is encouraging for SMBs as they can use funds to invest in the future and ease day-to-day cashflow issues. For best practice working capital management, accountants should consider using a tool that automates AP and AR processes to gain greater cash visibility.

Artificial Intelligence Funding

£7.4m has been allocated to a new AI upskilling fund to help SMBs develop their AI skills.

No further information is available at present, but it’s possible that accounting and bookkeeping firms can use this for internal purposes.

Investment Zones

To level up business activity across the country, the Government announced six new investment zones: Greater Manchester, Liverpool City Region, North East of England, South Yorkshire, West Midland, and Tees Valley.

Is the Best Yet To Come?

With an election not due to be called until November, there will likely be an Autumn statement first in which the Chancellor will announce further tax-cutting measures that may be maintained if there is a change of Government.