The 2024 Budget delivered significant updates for businesses, taxes, and inheritance planning, reflecting the government’s efforts to balance fiscal challenges with economic growth. For business owners and individuals, these changes bring both opportunities and challenges, making strategic planning more important than ever.
Let’s dive into the highlights affecting businesses, other taxes, and inheritance tax (IHT), and how you can adapt effectively.
1. Key Business Tax Changes
Businesses saw several updates designed to encourage growth while addressing sustainability goals:
- Corporation Tax Rates Remain Steady
The main Corporation Tax rate remains at 25%, with no additional increases. However, the Small Profits Rate continues to apply at 19% for profits up to £50,000. - Investment Reliefs
- Enhanced reliefs are now available for investments in green technology and energy-efficient infrastructure.
- The Super Deduction, introduced in prior budgets, has been replaced with a permanent full expensing regime for qualifying plant and machinery.
- R&D Tax Credits
- Additional support for small and medium enterprises (SMEs) in innovation-heavy industries, particularly in AI, renewable energy, and biotech.
What This Means for Businesses:
These changes reinforce the importance of capital investments in growth and sustainability. Businesses should also explore R&D opportunities to maximise tax savings.
2. Updates to Other Taxes
Beyond business-specific changes, there are notable updates for other taxes:
- VAT Threshold
- The VAT registration threshold remains frozen at £85,000 until 2026, which will pull more small businesses into the VAT system as revenues grow.
- Stamp Duty Land Tax (SDLT)
- No changes were made in this Budget, but the government signalled future reforms aimed at reducing housing market barriers.
- Alcohol and Tobacco Duties
- Increases aligned with inflation, raising costs for businesses in the hospitality sector.
What This Means for Individuals and Businesses:
For businesses near the VAT threshold, careful monitoring of turnover and strategic planning can delay or optimise VAT registration. Those in affected sectors, such as hospitality, should account for rising costs in pricing strategies.
3. Inheritance Tax (IHT) Updates
Inheritance Tax remains a contentious topic, and while no immediate rate changes were introduced, the government hinted at potential reforms in the near future.
- Nil-Rate Band Freeze
- The nil-rate band (£325,000) and residence nil-rate band (£175,000) remain frozen until 2028, meaning more estates will fall within the taxable bracket as property values rise.
- Trust and Gifting Rules Under Review
- A review of the rules governing trusts and lifetime gifts is underway, with potential changes expected in the next Budget.
What This Means for Families:
The freeze on thresholds, combined with rising property values, increases IHT exposure. Early estate planning, including trusts and lifetime gifting, is essential to minimise liabilities.
4. Case Study: Leveraging Budget Changes for Business Growth
Emily runs a mid-sized manufacturing company and is looking to expand her operations. Key actions she took following the Budget include:
- Full Expensing
- Emily purchased £150,000 worth of new machinery, claiming 100% of the cost against her taxable profits.
- R&D Tax Credits
- She utilised enhanced R&D credits to fund a project exploring sustainable packaging solutions, reducing her tax bill further.
- Energy Efficiency Investment
- By upgrading her factory’s energy systems, she qualified for additional green investment reliefs.
These measures allowed Emily to reinvest tax savings into her business, supporting long-term growth.
5. Proactive Steps for Businesses and Individuals
To make the most of Budget 2024 changes, consider the following strategies:
- Maximise Investment Reliefs
- Take advantage of full expensing for plant and machinery, and explore green investment reliefs.
- Plan for VAT Threshold
- If nearing the VAT registration threshold, consider whether voluntary registration or strategic planning is more beneficial.
- Estate Planning
- Review your estate planning strategies, including lifetime gifting and trusts, to mitigate IHT exposure.
- Explore R&D Opportunities
- Businesses in tech, biotech, and renewable energy should investigate eligibility for R&D credits.
How COPA Accounting Can Help
At COPA Accounting, we specialise in helping businesses and individuals navigate tax changes effectively. Here’s how we can assist you:
- Tax Planning and Compliance
- Ensure your business maximises reliefs and remains compliant with evolving tax laws.
- Inheritance Tax Planning
- Protect your family’s wealth with tailored strategies, including trusts and gifting.
- Business Growth Strategies
- Leverage Budget changes to reinvest in growth, from full expensing to R&D credits.
- VAT Management
- For businesses approaching the threshold, we provide guidance on VAT registration and optimisation.
Conclusion
The 2024 Budget brings opportunities for businesses to grow through strategic investments while emphasising the importance of proactive planning for individuals and families facing increasing tax burdens.
With expert guidance, you can turn these changes into opportunities for savings and growth. Contact COPA Accounting today to learn how we can support you.
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