Businesses react to the Spring Budget

It was a mixed reaction to the Chancellor's budget from businesses across the South with the overall impression one that not enough had been done to help companies and SMEs in particular.

Tim Walker, Managing Director of Hampshire-based computer solutions company Aura Technology, said:

“I was encouraged to see our growth stats, especially when compared to other developed nations, and a growth projection of 1.9% is really positive.”

"Tim was buoyant when it came to what was on offer for business too. He said, “Stimulating investment and the extension of the recovery loan scheme are excellent; that will help a lot of SME’s. It was also good to see the threshold at which small businesses must register to pay VAT raised from £85,000 to £90,000 from April.

"Freeports also made an appearance in today’s budget, but like many in the Hampshire business community, the lack of detail when it comes to what economic benefit it could bring to the region is still missing. Tim said, “It would be good to know more; hearing these investment announcements for freeports and similar is fantastic, but are they really up and running? And will they make a big difference anytime soon?

"One of the key highlights for Tim was Jeremy Hunt axing the UK’s non-dom rules, in a move that mirrors a longstanding Labour policy and which the Chancellor said would be used to cut taxes on working families in the UK. Tim gave his thoughts, he said, “It’s only right that those with the broadest shoulders should pay the most, a well-borrowed policy from Labour. It feels like a much fairer system as the money can then benefit working families.”

"On green investment announcements, Tim felt disappointed. He said, “It’s still tiny; £270 million for new technology research should be in the billions. Although seeing £230 million of funding going towards police technology to improve response times is positive, ensuring how these tech projects will be managed to ensure the money is well spent was not so well explained and could be crucial.”

Huw Miles, Managing Partner at Paris Smith

"As anticipated, this wasn’t a business focused budget, rather a headline-grabbing budget focused on the consumer in an election year. 

"Looking at the detail, the introduction of full expensing for leased assets will be brought in ‘as soon as it’s affordable’ but I’m not sure how much impetus that will provide businesses, assuming it actually happens.  At first sight, this looks like it might apply to a business choosing to lease rather than buy an asset.  In fact, it applies to the purchase of assets which are then leased to others – a common practice in the construction industry.  

"The extension of the VAT threshold from £85,000 to £90,000 won’t make much of an impact either, but will help some small businesses remain price competitive. The reduction in CGT from 28% to 24% will only benefit landlords with significant portfolios.

"All in all, there was nothing new here to really help boost our regional business economy and promote inward investment."

Dominic Thackray, Financial Advisor at MHA Caves Wealth said:

"In the same vein that the Mansion House Compact is looking to encourage investments into UK unlisted companies with pensions, Hunt is looking to introduce the Great British ISA as a £5,000 extension to the £20,000 ISA allowance. Outside of the debate around the dictation of asset allocation, which should vary between investors when considering their views on risk, my consideration is around the complexities under which this could be introduced to provide value and other opportunities. In my view this will likely be dictated by the restrictions on what UK investments are available within the Great British ISA.

"If this is in-line with the Mansion House Compact this may require investment into unlisted companies, and the nature of accessing these either requires large amounts of capital to bring value, which the £5,000 a year allowance prohibits, or via an open-ended investment fund pooling money from groups of investors and managed by fund managers. As ever, the devil is in the detail but there is the risk that opening to the use of larger UK listed companies will place little restriction on how much commercial activity takes place within the UK.

"If the use of UK unlisted equities is stipulated, the nature of these investments means active investment management, potentially the lack of daily liquidity and at a higher cost than listed investments as identifying smaller companies comes at higher expense. If this is the case, and investors are looking to invest into small UK companies, are Venture Capital Trusts (VCTs) better placed? VCTs are pooled investments and also achieve tax free returns in the same way the Great British ISA would, and also comes with a 30% income tax relief claimable on the amount invested with an annual allowance of £200,000.

"As ever, the phrase ‘don’t let the tax tail wag the investment dog’ springs to mind, but it may be that there are existing investment vehicles better served for some if there is a large constraint on the type of UK companies that can be invested into with the Great British ISA."

Sheryl Davis, Partner at Saffery in High Wycombe, said:

"The abolition of the Stamp Duty Land Tax (SDLT) multiple dwellings relief, could be considered a blow for many. The relief applies to qualifying furnished properties that are available for short term holiday letting and gives owners access to CGT reliefs such as rollover and gift relief, as well as capital allowances on qualifying furniture, equipment and fixtures, and a full deduction against income for related financing costs.

"Profits from Furnished Holiday Let s also count as earnings for pension saving purposes. The impact of this change for property owners who were relying on FHL properties and businesses being classed as trading for Inheritance Tax (IHT) planning purposes, remains to be seen. Draft legislation is promised in due course.

"The reduction in the higher rate of CGT on property from 28% to 24% is clearly a measure, coupled with the abolition of the FHL regime, to bring more residential property onto the market and encourage the sale of second homes. That’s fine when a second home is held as an investment, but when they form a vital part of a diversified working rural business already pressured by rising costs and uncertainty around future agricultural support, this may pose more of a problem."

Ross McNally, Chief Executive and Executive Chair of Hampshire Chamber of Commerce, said:

“The Budget was not as pro-business as previous announcements from the Chancellor.

“Given where we are in the political cycle, with an election due this year, his focus was far more on the scope for personal tax changes and investment in public services than anything groundbreaking for business.

“There were some welcome announcements, however.

“The extension of the ‘full expensing’ regime to leased as well as purchased assets will enable more firms to recoup investment costs associated with spending on plant, machinery and IT equipment.

“The raising of the VAT threshold from £85,000 to £90,000 will help the competitiveness of many smaller businesses.

“The 2p cut in National Insurance contributions will put more money into employees’ pockets and so give businesses more chance to hire and keep the staff they need.

“The extension for another year of the 5p fuel duty cut, which had been to end this month, will be welcomed by all firms who rely on motor transport.

“People looking to save and invest in a tax-efficient way while backing the UK will cheer the announcement of the new ‘British ISA’, an individual saving account with an extra £5,000 on top of the usual ISA limit.

“And in Hampshire, where we are actively looking to grow film and TV investment, the Chancellor’s announcement of more tax relief for these industries will go down well.

“Overall, amid all the current challenges for business and public services, and pressure to announce pre-election giveaways, the Chancellor held to his aim of remaining fiscally responsible.

“He showed positivity about the UK’s economic prospects and signalled his backing for businesses keen to invest.”

Nigel Smith, Managing Partner at Ellis Jones Solicitors, said:

“It was disappointing that the Chancellor didn’t have more meaningful measures to announce, given that a general election is around the corner.

“With no headline grabbing policy at the end, it felt as if the Chancellor had a hat without a rabbit, although we will wait to see exactly what is in the small print.”

David Chimson, Partner at Saffery and Head of Landed Estate and Rural Business Group, said:

"The Chancellor seemed to be enjoying his Budget speech and took many opportunities to criticise Labour and the Lib Dems on their tax principles today. The focus for Mr Hunt was to demonstrate that he could cut taxes without increasing borrowing. The economics are clearly complicated but the taxation measures he announced are certainly interesting. Many of them will not come as a surprise. There was the well trailed NIC reduction for employee and self-employed NIC to be reduced from 10% - 8% and from 8% to 6%, respectively.

"The Chancellor also took the opportunity, again it had been hinted at, to announce major changes to the non-domicile regime. This has been a Labour objective, but the Chancellor indicated that they may have taken the idea from Nigel Lawson who apparently wanted to do something similar in 1988! This is going to be a major change and will require consultation on various aspects so the scrutinization of the detail by accountants and advice to those affected is going to be crucial. It appears that for the first four years for UK resident “non-doms” there will be no UK taxation on overseas income and gains but after that all income and gains will be taxed in the UK. Transitional arrangements will be needed and the Chancellor was at pains to argue this wouldn’t affect inward investment.

"There was also changes to the Capital Gains Tax Regime for property owners. The highest rate of CGT on residential property is going to be reduced to 24% (from 28%) from 6 April 2024. This may mean that if you are planning to sell a property you will pay CGT on that it is worthwhile waiting, although the CGT annual exemption is also halving to £3,000 per person at the same time, so there will be a point where it is still beneficial to sell in the current tax year. In addition, he will be abolishing the status of Furnished Holiday Lets from April 2025, which can have favourable tax status, the rationale Mr Hunt said was to increase supply of longer term lettings.

"Whilst the Chancellor did argue this was a tax reducing Budget, there were no changes to the tax thresholds which means there will be a greater number of people falling into the higher rates of tax as a result of this fiscal drag. As ever, there will be some winners and some losers in what is going to be the last Budget before the General Election."

Alan Rolfe, Senior Tax Manager at HWB Chartered Accountants, said:

“There was inevitably a pre-election element to the Budget but, given the economic backdrop, few major surprises. Some technical changes to tax rules were unexpected.

“The headline announcement for most people was the 2% National Insurance cut from this April. This benefits employees’ take-home pay and it means employers can offer the same salaries at less cost.

“The raising of the child benefit threshold for higher rate earners from £50,000 to £60,000, tapering down to zero at £80,000, is significant. It will enable substantially more parents to take advantage of child benefit while earning.

“There was potentially good news for people looking for tax-free investment opportunities with the announcement of a consultation on a UK ISA. If it goes ahead, this will enable an extra £5,000 to be put into an individual savings account while encouraging investment in UK companies. If our economy grows, so in turn does the value of the ISA.

“Small businesses will benefit from the rise in the VAT registration threshold from £85,000 to £90,000. The ceiling has not kept pace with inflation in recent years and raising it will make all kinds of traders and firms a little more competitive in their pricing.

“There were three specific property tax changes which together paint a mixed picture for landlords.

“The abolition of the tax advantage on furnished holiday lets and the removal of stamp duty relief on multiple dwellings were both predicted.

“On the other hand, landlords and owners will welcome the 4% cut in higher-rate Capital Gain Tax on residential property sales. The jury is out as to whether or not this will stimulate more transactions and improve the market.”

Jon Hickman, Partner at BDO in Southampton, said:

“The Chancellor was under pressure to deliver tax cuts and while this wasn’t forthcoming for businesses with some hoping there would be a reduction to corporation tax signposted, individual taxpayers will welcome the national insurance cuts announced.

“Despite being pitched as a Budget for long-term growth, there was very little for business. The only obvious winner being the creative industries. Employers will welcome the measures announced today around lifting the child benefit threshold to £60,000 as it will help employees. For smaller businesses, lifting the threshold for VAT registration to £90,000 will be popular despite being limited. The proposed extension of full expensing to leased assets may also encourage investment by businesses in the region, albeit there feels a way to go before this can be introduced.

“It will be interesting to follow the consultation around the “British” ISA which could bring an additional £5,000 tax free allowance for individual investors but should also help to stimulate investment in regional growth businesses across the UK.”

Richard Godman, Tax Partner at Menzies LLP, said:

“This Budget was largely a case of too little, too late for most businesses. The Chancellor needed to use today’s announcements to shore up the stuttering UK economy. A roaring success it was not.

"While the headline announcement, a 2p cut to the National Insurance contribution rate, is clearly aimed at winning over disgruntled voters, many still won’t be better off due to the freeze in tax band thresholds – a measure brought in when the PM Rishi Sunak was Chancellor.

"And as with last November’s Autumn Statement, it’s disappointing to see the Chancellor largely neglect British businesses with today’s measures. No such cut in the NI rate was announced for employer contributions, for example – a measure that would have been welcomed by struggling businesses in the retail and hospitality sectors especially.

"Further, while the current non-dom system is complicated and in need of reform, the longer-term removal of the benefit after four years may backfire with a sizeable impact to British businesses. Firms, especially in the City, are already facing intense competition in the race for global top talent, and the non-dom tax status has thus far been a powerful incentive to work in the UK. The Chancellor said himself in 2022 that these individuals could just as easily choose to live in other countries and contribute to their businesses and economies – and now they may well do so.

"Overall, today’s Budget has done more to secure media headlines than to secure long-term, sustained prosperity for British people and businesses.”

Johnathan Dudley, National Head of Manufacturing at Crowe, said:

“There were a number of initiatives around the edges, such as the fuel duty freeze, that will benefit manufacturers and the SME sector but little direct assistance unless you are in the technology sector, which saw the majority of investment announcements.

“But, despite the investment incentives intended to help establish the UK as a world leader in high growth industries, including the creative sector, advanced manufacturing and life sciences, I question where this money is going to be delivered.

“If it mainly ends up with large, listed companies and original equipment manufacturers, how is this going to benefit the supply chain and SMEs who make up the vast majority of their suppliers and the reason for them to source in the UK.

“On the announcements on Small Modular Reactors, I welcome the decision to seek initial tender responses by June this year but, now that we are free from EU constraints, I would hope that UK owned and based companies are favoured, with the consequent knock on effect for our nuclear supply chain.”

Martin Taylor, Co-Founder and Deputy CEO at Content Guru, said:

“The backing for the UK’s AI industry with an increase in funding for the Alan Turing Institute is welcome and will help the sector stay at the forefront of technological innovation. It’s also important the Chancellor announced plans to increase AI adoption within the UK public sector that will allow for cost savings to be made across the next few years.

"The UK has lagged behind other leading economies when it comes to productivity and more must be done to ensure the public sector is operating as efficiently as possible, especially against the backdrop of tough economic conditions. If implemented effectively, AI has the potential to transform public services by providing a much needed productivity boost all whilst balancing the books and not compromising on the delivery of services.”

Stephen Phipson, Chief Executive of Make UK, said:

“Industry will welcome this statement which builds on a number of other key announcements in recent months. The Chancellor clearly sees manufacturing as a key sector in the economy of the future and is slowly, but surely, putting in place the building blocks of an industrial strategy.

“The extension of full expensing to leased assets will benefit smaller companies in particular and, we would urge draft legislation to be brought forward as soon as possible so that this measure can be made permanent at the earliest opportunity.”

Ian Girling, Chief Executive of Dorset Chamber, said:

“The Chancellor’s focus was clearly on fiscal responsibility in the Budget.

“Certainly, some measures will be welcomed by business, including the continued freeze on fuel duty, extension of full expensing for leased assets, tax relief for creative industries and extension of the recovery loan scheme.

“It was encouraging to see movement on the VAT registration threshold from £85,000 to £90,000 but some businesses in Dorset will have felt he could have gone much further.

“There was good news for individuals and families, including further cuts in National Insurance, changes to the child benefit threshold and a new British ISA savings scheme.

“Disappointingly, again there appeared to be little for Dorset when it came to funding for levelling up and regeneration although there may be more in the detail of the Budget.

“A statement of intent on business rates and a commitment to extend Local Skills Improvement Plans (LSIPs) would also have helped to inspire more confidence as we look ahead to the forthcoming general election.”