What the spring budget means for SMEs in 2024

Numerous measures were announced in the spring budget which will support entrepreneurs, SMEs and self-employed people, who collectively make up the majority of our valued customer base. We round up the key changes which will impact SMEs and, we hope, help them to achieve success.

Increased VAT threshold

It’s good news for small businesses, as the Chancellor Jeremy Hunt announced the VAT threshold will be increased to £90,000 from £85,000. This means that around 28,000 small businesses won’t need to register for VAT anymore. While this is beneficial to businesses, Michelle Ovens CBE, founder of Small Business Britain, believes it will create a barrier to growth and a long term solution will need to be found in the future.

New tax deductibility on training costs

Training is vital to supporting and boosting the growth of SMEs so it will be welcome news for many that HMRC has introduced new criteria for the tax deductibility on training costs for sole-traders and self-employed. This will enable SMEs to continue investing in their staff to maintain skill levels and to keep staff on top of industry developments.

Reduction in National Insurance contributions

In a move set to benefit millions, National Insurance contributions (NICs) for the self-employed are to be reduced to 6%. This decrease in NICs will hopefully boost earnings for the UK’s sole-traders; and overall provide some financial relief through an average saving of £650 a year. It’s good news for employees as well: National Insurance contributions are set to fall to 8%, following a previous 2% reduction in January. Combined, this relief will save the average worker on £35,400 over £900 a year, according to The Treasury. This will benefit employers and employees alike.

Extended access to government-backed loans

SMEs needing a business loan will be happy to hear the Covid relief scheme has been extended until 2026. It has been renamed the Growth Guarantee Scheme, and under it, the government will guarantee 70% of loans of up to £2million. This £200million extension will support growing organisations as they invest and expand by providing 11,000 small businesses access to finance.

While many argue these new changes aren’t enough, it is still worth celebrating these small wins for SMEs. In other positive news, the chancellor announced that inflation was falling ahead of target and is set to hit the government’s 2% target in a few months’ time, almost a year ahead of predictions. This will hopefully release pressures on cost of living and trickle down into greater success for entrepreneurs as disposable income starts to slowly rise.

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