The UK 2024 Budget brings significant changes for businesses across the country, with a focus on economic resilience, supporting growth, and addressing the unique challenges of the current financial landscape. For small business owners, understanding how these changes affect your bottom line is crucial. As an accounting firm based in Mansfield, we’ll walk you through the key aspects of this budget and provide insights into how they may impact your business operations, planning, and cash flow.
One of the main themes of the 2024 Budget is a continued commitment to supporting small businesses through tax reliefs and incentives. The government has extended the Annual Investment Allowance, allowing small businesses to claim up to £1 million on qualifying capital expenditure, such as machinery and equipment. This can be a valuable opportunity if you’re considering expanding or upgrading assets, as it allows you to deduct these expenses from your taxable income.
In addition, the government has introduced a temporary extension to the “super deduction,” giving small businesses an enhanced capital allowance on investments in plant and machinery. For companies making substantial investments, this can mean significant tax savings, encouraging growth and productivity.
VAT remains a priority, with the VAT registration threshold staying at £85,000 until 2026. However, with an increased focus on digitalisation, the government is pushing small businesses to comply with Making Tax Digital (MTD) for VAT, corporation tax, and eventually income tax self-assessment. The shift towards MTD aims to streamline tax reporting, reducing errors and improving efficiency. Taking the necessary steps now to ensure your business is MTD-compliant is highly recommended, as it will not only align with future requirements but can also simplify the process of managing your finances on a regular basis.
Employment costs are another major consideration for many small businesses. The 2024 Budget has increased the National Living Wage to £11.00 per hour, reflecting rising living costs. While this increase can be a positive step for employees, it’s essential for business owners to assess the potential impact on payroll expenses. For small businesses with a tight budget, wage increases may require re-evaluating hiring practices or adjusting other operational costs to maintain profitability.
The budget also introduces a new “Employment Allowance” for small businesses with fewer than ten employees. This initiative is designed to offset some of the additional costs brought on by wage increases, allowing qualifying businesses to claim up to £5,000 in National Insurance relief. This allowance could be particularly useful for businesses balancing wage increases with other operational expenses.
Corporation tax rates continue to be a talking point, especially with the recent increase to 25% for businesses earning over £250,000. While most small businesses fall below this threshold, it's worth noting that marginal relief is available for profits between £50,000 and £250,000, which could impact those nearing these limits. For many small business owners, the effective tax rate is a key component in financial planning, so consulting with an accountant can help you explore ways to optimise tax efficiency.
The government is also focusing on supporting businesses with property-related costs through the extension of the Small Business Rates Relief. This scheme provides full or partial relief for businesses with a property rateable value below £15,000, benefiting many small retail and service businesses in Mansfield. Claiming this relief if eligible can reduce operational costs, allowing funds to be reallocated to other areas like marketing or inventory.
For innovative small businesses, particularly in sectors like technology, engineering, or healthcare, the 2024 Budget includes additional support through Research & Development (R&D) tax reliefs. Small and medium-sized enterprises can continue to benefit from enhanced deductions on qualifying R&D expenditures, with a focus on activities that advance knowledge in science or technology. For businesses investing in product development or improved processes, exploring R&D tax credits could result in significant savings.
The government has also introduced a new “R&D Intensive” rate, which offers even greater deductions for businesses spending a substantial portion of their budget on R&D activities. This incentive is part of a broader strategy to encourage innovation and keep the UK competitive in global markets. Keeping detailed records of all R&D activities is recommended, as these records can simplify the claim process and maximise the potential benefit.
Sustainability and environmental responsibility are also prominent in the 2024 Budget, with various incentives introduced to encourage small businesses to adopt greener practices. These include grants for installing energy-efficient equipment and tax incentives for investing in renewable energy sources, such as solar panels or energy-saving technology. For small businesses, these incentives can provide a double benefit by reducing energy bills and potentially lowering tax liabilities.
There is also an expanded Green Investment Fund aimed at supporting small businesses looking to reduce their environmental impact. Businesses in Mansfield keen to adopt sustainable practices may find this fund a helpful resource for funding environmentally-friendly improvements.
The 2024 Budget recognises the impact of the cost-of-living crisis on both business owners and employees. To provide support, there are increased personal tax allowances and credits for low- to middle-income households. Although these measures do not directly impact small businesses, they may help stabilise consumer spending, which can benefit local businesses in sectors like retail, hospitality, and services.
Additionally, small business owners themselves can take advantage of certain tax reliefs and allowances to ease personal financial pressures. Utilising the Dividend Allowance or contributing to personal pensions can help minimise tax liabilities. Working with an accountant can provide tailored advice on the most effective ways to balance business and personal finances.
Navigating the complexities of the 2024 Budget can be challenging, particularly with the array of reliefs, thresholds, and incentives on offer. For a small business owner in Mansfield, planning ahead with a knowledgeable accountant can make a significant difference in maximising these benefits and ensuring that your business remains resilient in the face of economic changes.
Keeping up with these new developments is vital, and an accountant can guide you in making informed decisions around everything from investment and hiring to day-to-day cash flow management. Whether it’s understanding how MTD impacts your reporting or exploring eligibility for small business reliefs, having an accountant by your side can bring clarity and peace of mind, allowing you to focus on growing your business in 2024 and beyond.
The 2024 Budget presents both opportunities and challenges, but with careful planning, small businesses in Mansfield can continue to thrive in a dynamic economic landscape.
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