Today we witnessed a Budget that was caught between a rock and a hard place. There was one previously leaked tax cut with some interesting consequences and some tinkering around the edges of other taxes.

The Chancellor, tasked with being boring and maintaining market stability post-Liz Truss’s budget, is now attempting to convey a message of hope that the eye watering levels of tax will be eased. However, he’s constrained by an economy that has recently slipped into recession and is forecast to show minimal growth this year.

While the increase in the VAT threshold may benefit some, it’s largely ‘too little, too late’ for many businesses.  On the other hand, the reduction in the Capital Gains Tax rate for owners of buy-to-let properties will likely be well-received.

The biggest winners are employees earning over £12,570 per year, who will experience a slight boost from the National Insurance cut in April 2024, particularly coming hot off the heels of the mid-year cut that took effect from January 2024.

However, the most intriguing development from today is the implications of the Self-Employed National Insurance rate being reduced to 6% for earnings between £12,570 and £50,270.

Is Jeremy Hunting Down Limited Companies?

The Budget dealt another blow to the effectiveness of Limited Companies for small businesses. Following years of hits to the tax efficiency of Limited Companies, including several increases in Dividend Tax rates and the rise in Corporation Tax rates from previous budgets, our initial analysis today suggests that companies where all profits are drawn should be seriously considering utilising an LLP trading structure instead.

Partnership or Self-Employed tax rates consistently out perform Limited Companies at most profit levels. Limited Companies only really hold their own when profits exceed the owners’ drawings requirement. However, this is complex territory, so please refer to our full analysis for more details.

Income tax bands remain unchanged, with no indication of increasing until 2028 under current plans. Thus, our standard Director’s Salary and Dividend planning remains unaffected for 2024, unless exploring LLP options.

Many pundits were predicting that we would see another budget level announcement later in the year before an election is called.  The question will be if there is any wriggle room to reduce the tax burden further with such a low forecast in growth. This budget has certainly left us with some interesting questions!

Read the detailed Budget analysis