Spring Budget 2024: what business tax measures can the UK expect?
Published on 21st Feb 2024
Tax cuts are expected in the chancellor's statement on 6 March – but they may be limited
The UK chancellor, Jeremy Hunt, will present his Spring Budget on 6 March 2024. It will be accompanied by an economic and fiscal forecast by the Office of Budget Responsibility (OBR).
Although many predict that this will be his last fiscal statement before a general election, it is possible that, depending on the date of the election, there could be a final Autumn Statement (which normally takes place in November). This could give the current government another chance to seek to appeal to voters with its fiscal announcements.
Tax cuts predicted
With the general election looming later this year, many are expecting tax cuts (directed at the voting public) to be announced at the Spring Budget, however, the extent and timing of them is far from certain.
Although the chancellor suggested in January that he was now in a position to start cutting taxes, he has since managed expectations, indicating that he will have less room for tax cuts in the Spring Budget compared to the Autumn Statement. It is also uncertain whether any such tax cuts would come into effect on 6 April 2024 or if they would be gradually implemented over several years, with the possibility of being reversed by any new incoming government.
Income tax and national insurance
There is much speculation that the basic rate of income tax (currently 20%) may be cut by one or two per cent (which was a promise Rishi Sunak made in his Conservative Party leadership campaign of 2022).
It is also possible that the chancellor could break the freeze (which is currently due to end in April 2028) on the income tax personal allowance, higher rate threshold and main national insurance contributions (NICs) thresholds, which would ease the impact of fiscal drag. There could also be further reductions in NICs for those in work.
The government recently announced a number of tax simplification measures, including mandatory reporting and paying of income tax and Class 1A NICs on benefits in kind via payroll software from April 2026. Further information is to be published, although it is possible that the Spring Budget may be too soon for details to be provided.
Inheritance tax
At the Autumn Statement last November, there were widespread rumours of a potential reduction or even complete abolition of inheritance tax (IHT) but nothing materialised.
It is possible that IHT will be back in the spotlight to appeal to older voters, perhaps an increase in the nil rate band (of £325,000) which has been frozen since April 2009 or a complete abolition of the tax. It is reported, however, that IHT only affects 4% of estates so this measure is unlikely to be of broad electoral appeal.
Stamp duty land tax
Other tax cuts that could prove popular with voters include a cut in rates of stamp duty land tax (SDLT) or an extension of thresholds. A possible "green" SDLT measure could be announced (which was also rumoured at the Autumn Statement) of delivering an SDLT rebate to buyers who improve the energy efficiency of their homes within two years of its purchase.
VAT
Since 2017, the VAT threshold – the point at which businesses are required to register for VAT and which currently stands at £85,000 – has remained unchanged. The chancellor has consistently highlighted the government's focus on economic growth, and raising the VAT threshold has the potential to stimulate economic growth by removing a hindrance for businesses as they approach it.
The OBR is currently reviewing the "tourist tax", which prevents overseas visitors from reclaiming VAT on shopping purchases in the UK. It is possible that the chancellor may announce the findings of this review at the Spring Budget.
Growing UK business
Investment zones
The chancellor may announce further detail of the locations of the twelve forthcoming investment zones, expanding on the few locations that have already been announced.
These zones aim to accelerate innovation in high-potential knowledge-intensive growth clusters across the UK. They will benefit from a package of tax reliefs including SDLT relief, enhanced first-year capital allowances for plant and machinery, enhanced structures and buildings allowances, employer NICs relief and business rates relief.
Improving inward investment
Keen to push forward with promoting inward investment into the UK, the government has already published its response to the consultation on reforming the UK's international tax rules on transfer pricing, permanent establishment and diverted profits tax. It has said it will publish draft legislation for consultation in 2024, but the Spring Budget may be too soon for this.
The outcome of the government's consultation is still awaited on the introduction of a corporate re-domiciliation regime to support companies seeking to relocate to the UK, so the chancellor could announce progress in this area.
Improvements to employee share schemes
The government has been consulting on improving and simplifying tax-advantaged save as you earn (SAYE) schemes and share incentive plans (to which Osborne Clarke responded). There is cross-industry support for improvements to these much-valued all-employee plans, and a formal response or an update on progress would be timely.
We may hear more detail around the reform of the tax treatment of Employee Ownership Trusts and Employee Benefit Trusts. The consultation (which closed last September and to which Osborne Clarke responded) was targeted at specific areas. It sought to ensure that the applicable tax regimes remain focused on the primary objectives of rewarding employees and encouraging employee ownership, while preventing tax advantages being obtained through use of these trusts outside of these intended purposes.
Anti-avoidance
Measures to clamp down on tax avoidance are a common feature for budget announcements. The government's response is awaited on proposals to regulate and tackle non-compliance in the "umbrella" company market and how to attain better compliance and regulation in the temporary workers market and there may be more detail on these areas.
Carbon border adjustment mechanism
On 18 December 2023, the government announced that it would introduce a carbon border adjustment mechanism (CBAM). Although the government will not implement it imminently (it has committed to do so by 2027), it announced that details on the design and delivery of a UK CBAM will be subject to consultation in 2024 including the precise list of products in scope, so further details may be forthcoming at the Spring Budget.
Osborne Clarke comment
The tax burden in the UK remains high and, according to the Institute of Fiscal Studies, the overall level of taxation will increase by more over this parliament than under any previous parliament since the 1950s (when comparable records began). While the chancellor will no doubt want to cut taxes, he will have to balance the interests of voters who are more worried about investment in public services against those wanting tax cuts. As such, it is unlikely that this budget will be overly generous although there are some measures the chancellor can take to ease the tax burden.
