Navigating the complex world of taxation can be daunting for small businesses, especially when changes are on the horizon. With 2024 already shaping up to be a pivotal year for tax legislation in the UK, it’s crucial for small business owners, self-employed individuals, and company directors to stay informed. In this blog post, we’ll dissect the latest tax changes, their potential impact on your business, and strategies to mitigate any negative effects. Whether you’re a seasoned business owner or new to the entrepreneurial world, understanding these changes is key to successful planning and growth.
BUSINESSES
Corporation Tax “Full Expensing” Policy:
The Chancellor announced the introduction of ‘full expensing’ for businesses from 1 April 2023 to 31 March 2026, allowing companies to deduct the full value of qualifying investments in plant and machinery from taxable profits.
Lately he announced an intention to include full expensing tax relief on leased assets. The relief will enable businesses to be more efficient by leasing assets to nurture productivity by getting the newest, cleanest and most efficient plant and machinery into the hands of business owners. No timeline for the start of the relief has been announced and the relief is subject to draft legislation to be published.
Research and Development (R&D) Support
A £500 million per year package of support for 20,000 R&D-intensive businesses through changes to R&D tax credits was announced. This is part of the government’s broader initiative to foster innovation and support technological advancement within the UK
UK Independent Film Tax Credit
At Spring Budget 2024, the Chancellor announced the UK Independent Film Tax Credit (IFTC). Under IFTC, eligible films will be able to opt-in to claim enhanced Audio-Visual Expenditure Credit (AVEC), at a rate of 53%, on their qualifying expenditure. Qualifying productions must have started principal photography on or after 1 April 2024, and only expenditure incurred on or after 1 April 2024 can be claimed. Claims can be submitted to HMRC from 1 April 2025 onwards, in respect of expenditure incurred from 1 April 2024, provided a film began principal photography after 1 April 2024.
R&D Tax Credits Reform
Research and Development (R&D) tax credits have long been a valuable incentive for innovative businesses. With the government’s ongoing commitment to bolster innovation, 2024 might bring reforms aimed at simplifying claims and making the credit more accessible to small businesses. Staying abreast of these changes can ensure your business maximizes its entitlements, fostering innovation and growth.
VAT Threshold Adjustments
From 1 April 2024 the taxable turnover threshold which determines whether a person must be registered for VAT will be increased from £85,000 to £90,000.
The taxable turnover threshold which determines whether a person may apply for deregistration will be increased from £83,000 to £88,000
Recovery loan scheme
The third iteration of the Recovery Loan Scheme – which is due to end in June 2024 – will be extended and renamed as the Growth Guarantee Scheme. The terms of the scheme will remain unchanged, ensuring continuity and consistency for lenders and the business community and will provide a 70% guarantee to participating lenders on finance of up to £2m offered to smaller businesses.
Furnished Holiday Lettings (FHL) regime abolished
The government will abolish the FHL tax regime, eliminating the tax advantage for landlords who let out short-term furnished holiday properties over those who let out residential properties to longer-term tenants. This will take effect from April 2025.
At the moment, landlords who use the furnished holiday lets regime can deduct the full cost of their mortgage interest payments from their rental income, are entitled to capital allowances on the furniture, pay lower capital gains tax (CGT) when they sell, are entitled to CGT rollover relief etc
INDIVIDUALS
Income tax
Income tax
As previously announced, Personal tax thresholds – ie personal allowance, basic and higher-rate thresholds for income tax remain frozen until April 2028 at the current level of £12,570 and £50,270. The additional rate threshold was reduced from £150,000 to £125,140 from 6 April 2023
Employment Incentives
To encourage employment and support the workforce, the government has unveiled several measures. These include increasing the pensions Annual Allowance from £40,000 to £60,000, removing the Lifetime Allowance, and introducing ‘Returnerships’ skills programs for older workers. A comprehensive plan aimed at boosting the UK’s workforce includes more stringent Universal Credit job search requirements and new employment schemes for disabled people and those with health conditions.
National Insurance Contributions (NIC) Cut
From 6 April 2024, there will be a two percentage point cut in the main rate of Employee’s Class 1 NIC, from 10 percent to 8 percent. For the self-employed, the Class 4 NIC rate will be cut from 8 percent to 6 percent. Additionally, the requirement to pay Class 2 NIC will end from 6 April 2024, with a consultation later in the year on how to deliver the abolition of Class 2 NIC
Changes to Non-Domiciled Tax Regime
Significant reforms to the taxation of non-UK domiciled individuals are set to take effect from 6 April 2025, moving to a residence-based tax system. This will impact how foreign income and gains are taxed for non-domiciled individuals resident in the UK for more than four tax years.
High Income Child Benefit Charge threshold
The government will introduce legislation in the Spring Finance Bill 2024 to increase the High Income Child Benefit Charge (HICBC) adjusted net income starting threshold to £60,000, from the 2024-25 tax year onwards. It will also amend section 681C to extend the HICBC taper to between £60,000 and £80,000. For those with income between £60,000 and £80,000, the rate at which HICBC is charged is halved, and will equal 1% for every £200 of income that exceeds £60,000. The charge on taxpayers with income above £80,000 will be equal to the full amount of child benefit paid.
New British ISA investment allowance
The government has announced the introduction of the UK ISA. This will have a new ISA allowance of £5,000 in addition to the existing annual ISA allowance of £20,000 and will provide a new tax-free savings opportunity for people to invest in the UK. This will be introduced after a consultation which will run from 6 March 2024 to 6 June 2024
Stamp Duty Land Tax (SDLT) and Multiple Dwellings Relief
Changes to SDLT include the abolition of Multiple Dwellings Relief effective from 1 June 2024, aiming to refocus the policy towards promoting investment in the private rented sector.
Conclusion
The landscape of taxation is ever-evolving, with 2024 set to introduce changes that could significantly impact small businesses in the UK. By staying informed and proactive in your tax planning, you can navigate these changes effectively and position your business for success. Remember, consulting with a professional accountant can provide personalized advice tailored to your business’s unique circumstances, ensuring compliance and optimizing your tax position.
In the face of these tax changes, it’s essential for small businesses to remain adaptable, informed, and strategic. By embracing these principles, you can turn potential challenges into opportunities for growth and resilience.
Call to Action
Navigating tax changes can be complex and time-consuming, but you don’t have to do it alone. Our accounting services are designed to help small businesses like yours stay ahead of the curve. Contact us today to learn how we can support your business through these changes and beyond. Let’s turn challenges into opportunities together.
