With the UK’s economic landscape showing the strains of a recent technical recession and a general election on the horizon, Chancellor Jeremy Hunt’s Spring Budget was crucial. Labelled as a ‘Budget for long-term growth,’ it aimed to strike a balance between fiscal prudence and necessary generosity.
This blog examines the significant takeaways from the budget, focusing on what they mean for startups and growth-focused businesses, particularly within the family firm sector.
Economic outlook: A glimmer of hope?
Despite the gloomy backdrop of recession and inflationary pressures, the Office for Budget Responsibility (OBR) provided a somewhat optimistic economic forecast. The economy is performing better than expected, though challenges remain. Notably, GDP grew by just 0.1% in 2023, but the OBR expects growth to accelerate gradually over the next five years.
This improvement is underpinned by a forecasted decline in inflation and interest rates, suggesting a potential easing of financial conditions. For businesses, particularly in sectors like manufacturing and technology, this could mean more favourable conditions for investment and expansion. However, the Chancellor emphasised the ongoing battle against inflation and the need for fiscal responsibility to enable long-term tax cuts and economic growth.
Personal tax changes: Boosting household incomes
A key feature of the Spring Budget was the reduction in personal taxation. The 2p cut to National Insurance Contributions (NICs), building on a previous cut, will see worker rates drop by four percentage points in six months—a significant decrease that will increase disposable income for millions of UK workers.
Other measures, such as the extension of the fuel duty freeze and cuts to capital gains tax on residential property, are designed to alleviate immediate financial pressures while promoting economic activity. For families, the reform of the High Income Child Benefit Charge (HICBC) and the introduction of a new British ISA will provide further financial relief and encourage investment in UK assets.
Business impact: Fostering growth and innovation
For businesses, especially SMEs and family-owned firms, the budget included several favourable measures. The increase in the VAT threshold from £85,000 to £90,000 will reduce the administrative burden for thousands of small businesses, allowing them to focus more on growth and less on compliance.
The abolition of the furnished holiday lettings relief is aimed at improving the availability of long-term rental properties, thus supporting local economies and reducing tax advantages that favoured short-term rentals. This change is particularly relevant for businesses in tourist-heavy areas, balancing the needs of local residents with those of the tourism sector.
Moreover, the continued focus on high-growth industries and the creative sector is promising. Enhanced funding and specific tax reliefs for these sectors aim to make the UK a more attractive place for innovative businesses and start-ups. These measures not only support current business needs but also look to future growth, aligning with global trends towards digitalisation and sustainability.
The path forward: Stability and resilience
Chancellor Hunt’s budget reflects a strategic approach to fostering a stable, growth-oriented economic environment. By lowering taxes, reducing regulatory burdens, and supporting key industries, the government aims to create a conducive environment for businesses to thrive.
For Alton & Co. and the businesses we advise, this budget provides multiple opportunities. Lower personal taxes mean more disposable income for consumers, potentially increasing demand for various services and products. Additionally, the targeted support for high-growth industries should encourage our clients in these sectors to consider additional investments or expansions.
While the economic outlook contains uncertainties, the Spring Budget has laid down several promising measures to support both individuals and businesses.
For our clients at Alton & Co., particularly those within the family firm sector, we see this as an opportunity to strengthen financial management and strategic planning, ensuring they are well-positioned to benefit from these changes. As we move forward, our focus will remain on helping our clients navigate this evolving economic landscape, making the most of the opportunities that lie ahead.
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