Speculation surrounding the Chancellor’s spring budget has reached a fever pitch since the turn of the calendar year. Business leaders and owners across the country have been on tenterhooks, eagerly awaiting the announcements. For many, business rates were at the forefront of their minds. Several influential trade bodies even penned a joint letter to the Chancellor, urging him to base the standard multiplier on the predicted inflation rate of 2%, rather than the September 2023 rate.
Despite being announced back in November, the reconfirmation of the standard multiplier increase on March 6 has left many disappointed. Starting from April 1st, commercial properties with rateable values (RV) exceeding £51,000 will face a 6.7% increase in their business rates. This aligns with the September 2023 inflation rate, which is more than triple the predicted CPI inflation rate for the second quarter of 2024 (2%).
Tax cuts were a predictable feature of this budget, but the specific taxes targeted were up for debate. The decision to further reduce the National Insurance (NI) tax raised eyebrows. Especially considering that the NI tax cut from the 2023 autumn budget had already taken effect in January. As we hurtle toward an inevitable General Election, it becomes evident that the choices made in this spring budget are aimed at bolstering the government’s voter base. Unfortunately, these decisions continue to prioritise the individual over businesses.
Experts had anticipated a 1% tax cut, which would have cost around £4.5 billion. However, the actual NI tax cut of 2% will require funding of approximately £10 billion. While this reduction benefits both individuals and businesses (easing the tax burden on companies for each employee’s NI contribution), it’s the same businesses that will bear the brunt of the 6.7% rate increase. In essence, any potential gains from the NI cut are effectively wiped out.
According to RVA Surveyors, utilising the 6.7% inflation rate will add over £1.5 billion to business rates. This financial burden underscores the delicate balance the Chancellor must strike between individual relief and business support.
As the dust settles on the spring budget, business owners and leaders grapple with the implications. The Chancellor’s choices reverberate through the economy, leaving some celebrating tax cuts while others lament the rising business rates. Only time will reveal the true impact of these decisions on the nation’s financial landscape.
