Today, the Chancellor of the Exchequer set out the Spring budget in which it addressed key areas which we had expected to be addressed given the continued challenges with rising costs.
Despite continued financial challenges however, it was announced that the Office for Budget Responsibility (OBR) is reporting economic growth because of falling inflation and real wages rising. The OBR are also reporting that living standards (as measured by real household disposable income) to grow by up to 0.8%.
The Government believes that the economy is moving positively in the right direction and accordingly, outlined today, that they can introduce further tax cuts, to those that were announced in the Autumn statement last year.
What the Spring Budget means for employers
- The main rate of employee National Insurance will be cut from 10% to 8% with effect from 6 April 2024. This in addition to the cut that was announced last Autumn and overall, is expected to save the average worker earning £35,4000 over £900 a year.
- There will also be a cut of 2p from the main rate of self-employed National Insurance, again, with effect from 6 April. This will again be in addition to the 1p cut that was introduced earlier this year.
- A further cut to tax is regarding the VAT registration threshold which is currently set at £85,000. It will be increased to £90,000 from April.
- Certain industries will also be soon to benefit from new tax reliefs. For instance, eligible film studios in England will see the introduction of a new 40% relief from business rates for the next 10 years. There will also be a new UK Independent Film Tax Credit and the rate of tax credit will be increased by 5%.
- Air passenger duty which is the tax paid on flights will be increased for business class tickets.
- The Government loan scheme that was introduced during COVID-19 will continue for small businesses until March 2026.
Economic Growth Forecast
Further context on the UK economy was also reported, which outlined that the OBR’s view of economic growth was that:
- The UK economy is to grow by 0.8% this year, and by 1.9% next year.
- 2% growth is predicted for 2026 with a further growth of 1.8% in 2027 and 1.7% in 2028.
- The forecast for inflation is that it is to fall below the Government’s 2% target by the end of June and furthermore, to continue falling to 1.5% in 2025.
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