The VAT registration threshold has been raised on Monday (1 April) from £85,000 to £90,000, taking 28,000 businesses out of paying VAT altogether.
Announced by chancellor Jeremy Hunt announced at Spring Budget, the move ensures that the UK has a higher threshold than any EU member state and joint highest in the Organisation for Economic Co-operation and Development (OECD).
The small business multiplier for business rates will also be frozen from today for a fourth consecutive year, protecting over a million ratepayers from a 6.6 per cent increase in their bills.
The measure is part of the £4.3 billion business rates support package announced at Autumn Statement that includes the 12-month extension of the 75 per cent relief for 230,000 Retail, Hospitality and Leisure (RHL) properties, also coming into force today.
“We’re rewarding work and backing Britain’s small businesses– the lifeblood of the economy and beating heart of communities – with support on VAT and business rates,” Gareth Davies, exchequer secretary to the treasury, said.
“Combined with our decisive action to reduce inflation from over 11 per cent to 3.4 per cent, these measures will help ensure the local, independent businesses that many of us cherish most will continue to thrive and help our economy grow.”
Welcoming the extra support for small businesses, Tina McKenzie, policy chair, Federation of Small Businesses (FSB), said: “This is a big day for small businesses. FSB has campaigned for decisive action to increase the VAT threshold, freeze business rates, and extend the retail, hospitality, and leisure discount and we’re pleased to these come in today.
“April 6 will also mean a cut in National Insurance for the self-employed – the government is right to take forward practical, impactful measures that help small businesses drive growth in all of our local communities.
The chancellor has announced a significant cut in the main rate of class 1 National Insurance, reducing it to 8 per cent from 6 April. This follows a prior cut from 12 per cent to 10 per cent in January. Additionally, the class 4 self-employed NICs rate will be reduced from 9 per cent to 6 per cent, along with the abolition of class 2 self-employed NICs.
The tax cuts for small businesses form part of the government’s ‘Help to Grow’ initiative to make 2024 the year of the SME, including through providing swift and simple access to finance with the British Business Bank having already delivered £1 billion of loans to over 100,000 businesses, and UK Export Finance providing £6.5 billion of support to help SMEs export around the world.
The first SME Connect event hosted by the prime minister and cabinet ministers on 18 March built on this as around 150 SMEs and business groups met to discuss the ongoing work the government is doing to support smaller firms.
At the conference, the prime minister announced a major package of reforms, including cutting red tape for SMEs, leveraging more private investment in female founders, and investing £60 million of support for businesses to deliver up to 20,000 more apprenticeship places.
Today also represents the first anniversary of the introduction of full expensing, a key business ask that enables companies to invest for less by receiving up to 25p off their tax bill for every £1 invested in qualifying plant and machinery. Billed as one of the biggest business tax cuts in modern British history, full expensing is worth more than £50 billion over the next five-year period.
Following engagement with industry, the chancellor announced at Spring Budget that the government will seek to extend full expensing to assets for leasing when fiscal conditions allow and will publish draft legislation for consultation shortly.
