Contractors and small business owners often navigate a unique landscape of regulation and taxation, and we know many of our umbrella employees and accountancy clients have more than a casual interest in the Government’s fiscal announcements. With that in mind, here’s how the Spring Budget 2024 might affect you as a contractor or small business owner.
National Insurance Contributions (NICs)
The main headline of this budget is a reduction in the “starter” rate of employee national insurance. In January, the rate was reduced from 12% to 10%, and reductions for self-employed workers that would take effect in April 2024 were announced.
This further reduction in Employee NICs takes the starter rate down to 8%, saving an employee earning £35,000 around £450. The rate of self-employed National Insurance will drop from 8% to 6%.
Contractors should note that the rate of employer’s National Insurance, which is paid by your Limited company, umbrella company or agency on your salary, has not changed.
VAT Threshold
The VAT registration threshold is increasing from £85,000 to £90,000. Businesses with annual taxable turnover below this amount won't be required to register for VAT. This change could have implications for limited-company contractors and small business owners, as they may have more flexibility in managing their finances without the burden of VAT registration. If you think may affect you or your strategy, please discuss it with your accountant.
Child Benefit
In 2013, parents earning £50,000 a year started losing some of their child benefit. The threshold has not changed in the years since, which means that the policy is affecting many more people than it did when it was introduced. If it had increased in line with rising prices, the point at which people would start losing child benefit would be almost £68,000.
As child benefit is based on the income of one partner, if two parents earn £50,000 each, they still get full child benefit, but if one earns £60,000 and the other isn't working (or they are a single parent) they don't get any child benefit.
The chancellor announced a consultation on moving the threshold to a household-based system. Because this will take years to implement, in the short term the threshold will increase to £60,000 with a higher taper from £60,000 to £80,000.
Property investments
There were a number of announcements that may affect property investments.
The chancellor says he will scrap tax breaks which make it more profitable for second home owners to let out their properties to holiday makers rather than to long-term tenants to rent. Hunt says he will abolish the furnished holiday lettings regime.
The higher rate of CGT on residential property will reduce from 28% to 24%.
Stamp duty relief on the purchase of multiple dwellings will be abolished.
Again, if you believe these changes will affect you or change your strategy, we’d advise you to discuss it with your accountant once full details are released.
If you have questions or if we can help in any way, please call our expert team on 01296 468483 or email info@orangegenie.com.