Budget 2024: In review

Friday March 8, 2024

What does the 2024 Spring Budget hold for businesses?

The Commons has emptied. The cameras, packed up. Another Spring Budget is over.

While it didn’t contain seismic changes – and has, as the smoke clears, been generally seen as an underwhelming set of announcements for UK Plc – it wasn’t without developments for businesses, including news on some anticipated measures that we discussed in our pre-Budget commentary.

What will management teams have been most pleased to hear, and what might have left some disappointed?

Expanding and unfreezing

As we discussed in our predictions piece, one of the biggest changes unveiled at 2023’s Autumn Statement was the making permanent of the full expensing allowance – a measure that essentially gives companies 25p tax relief on every £1 they spend on qualifying plant and machinery.

It’s a tax relief that is particularly beneficial for companies that rely on what can be expensive, complex machinery to run their operations and deliver their services, including many of the UK’s manufacturers, construction contractors and healthcare providers.

At the despatch box, the Chancellor extended full expensing to allow businesses to claim the relief on leased assets, as well as ones they purchase. This is a move that will likely be widely welcomed – it was on the Budget ‘wishlist’ of manufacturing trade body Make UK, and will help more businesses make the right type of investment, in the way that suits them, to meet their needs.

Businesses in the construction sector – together with logistics operators, and any company with large vehicle fleets – will also have been glad to hear the government’s commitment to maintaining the 5p cut on fuel duty, and freezing the charge for another 12 months.

While this doesn’t remove the risk of underlying fuel price volatility, it does deliver some welcome clarity over the tax burden on this, important, and often sizeable, area of operating costs.

Smaller businesses – including many retailers – will have been glad to see VAT reform finally make a Budget appearance.

In the Budget, the VAT threshold was increased to provide an additional £5,000 of headroom; rising from £85,000 to £90,000 in a move that the Treasury asserted would take 28,000 small businesses out of paying the tax.

It will undoubtedly help some, and anything that gives businesses more latitude for profitable growth will be viewed as a good thing. However, by keeping the VAT rate the same, the Chancellor offered no relief to businesses that do pay the rate.

‘Missed opportunities’

If we go off issues that attracted some of the most noise ahead of the Budget, then one of the most notable was a silence on reinstating tax-free shopping allowances – the loss of which has been mourned by UK retailers, hospitality firms and travel operators, and which the Centre for Economics and Business Research has suggested it losing the economy up to £10.7 billion in lost GDP.

Together with the limited scope of the VAT reform, voices from the retail and hospitality sector are already seeing this Budget as providing disappointingly little support in the face of what is still relatively weak demand, and high input costs across the board.

And, on the topic of cost pressures, employers weren’t given a helping hand in the form of any reduction in National Insurance rates.

While the rates for both employees and the self-employed were cut, employer contribution rates were maintained. This will be seen by some as a particularly painful blow just as the National Living Wage is set to rise in April, factors which will, together, keep a squeeze on already strained bottom lines.

What next?

In some ways, no big news is good news. We’ve not yet forgotten the economy-shaking impact of the ‘mini-Budget’.

Where support has been extended to businesses, it will be important that they review how they can make the most of it.

Beyond this, management teams must remain focused on building robust strategies to support short and long-term growth – doing everything they can to build their own foundation for success.

Related team

Justin Matthews

Justin Matthews

Justin Matthews

  • Partner
  • Financial Advisory
  • London