As we approach the Budget 2024, businesses are bracing for potential tax changes that could impact their operations and finances. With Chancellor Rachel Reeves set to unveil a series of measures, it’s clear that the UK government is focused on addressing economic challenges and the much-debated £22bn fiscal gap.
While the Chancellor has ruled out major tax hikes on income tax, NIC, VAT, and corporation tax, other areas such as employer NIC, capital gains tax, and inheritance tax are on the radar for potential changes. Businesses, particularly those in sectors impacted by employer-related costs and capital investments, will be watching closely for any policy shifts that could alter their tax liabilities.
Economic Outlook
With public debt remaining high, the focus on growth will be critical. The UK economy has shown better-than-expected performance in early 2024, with GDP growth above forecast and inflation stabilising. However, challenges remain, particularly in the form of high public spending and constrained fiscal space.
Lower interest rates are expected to provide some relief, with cuts projected into 2025. This will likely help both businesses and households manage costs more effectively, but broader economic growth is expected to remain modest.
Personal and Corporate Tax Outlook
Capital Gains Tax (CGT): Rates of CGT are expected to rise in Budget 2024, with several reform options on the table, including aligning CGT with income tax rates or reducing widely used exemptions. Businesses looking to dispose of assets should be aware of potential short-term changes and act accordingly to minimise tax liabilities.
Inheritance Tax (IHT): We could see changes in the IHT regime, particularly in the business and agricultural reliefs that allow family businesses to be passed down tax-free. Any restrictions in these areas could have significant implications for business succession planning.
Employer NIC and Pensions: While employee-related NIC increases have been ruled out, employer NIC could see adjustments, particularly on higher pension contributions. These changes could lead to increased costs for businesses and may impact hiring and retention strategies.
Focus on Growth and Investment
Despite potential tax increases, the government remains committed to driving growth through key initiatives, including the reform of planning laws and strategic investments in infrastructure and green energy. The Chancellor has indicated that full expensing of capital investments will be retained, providing relief for businesses making significant capital expenditures.
For those looking to maximise the benefits of tax-efficient investments, services like SEIS (Seed Enterprise Investment Scheme) can provide valuable opportunities. SEIS allows investors to gain relief on investments made in early-stage businesses, supporting growth while minimising tax liabilities.
If you’re concerned about the impact of the upcoming Budget on your business or personal finances, contact BSO Fintax today. We offer expert advice on navigating tax changes and maximising your investment potential through services like SEIS.
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