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Business owners are on tenterhooks in advance of the new Chancellor, Rachel Reeves, announcing her first Budget at the end of this month.

What business owners can expect from Budget 2024 – Haines Watts

Business owners are on tenterhooks in advance of the new Chancellor, Rachel Reeves, announcing her first Budget at the end of this month.

The new Labour government are making no bones about the challenges ahead – Sir Keir Starmer has already announced that “painful” decisions are coming.

So where could that pain be felt? Clare Boden, corporate tax director at the Bristol office of accountancy firm Haines Watts, identifies some likely targets.

“Over coming days and weeks we can expect to have some of the headline Budget announcements revealed in the media – it usually happens – but for now, at time of writing, businesses are largely in the dark.

The Government has said that it won’t raise the main rate of corporation tax, as well as NICs, income tax or VAT, but that doesn’t mean the CT system won’t change at all.

“One measure could be to remove the small profits rate – currently 19 per cent of profits under £50,000 – a potential challenge for the smallest businesses but potentially welcome for some, given the complexity around the associated companies rules.

A general reduction of the main rate of CT would encourage growth.

We may see further reductions in Business Asset Disposal Relief (BADR), previously known as Entrepreneur’s Relief, which currently reduces the rate of CGT from 20 per cent to 10 per cent on disposals of businesses or business assets.

Changes could be around the limits on the lifetime gain that can benefit from the reduced CGT rate, or maybe increasing the minimum shareholding requirement from the current, low-risk level of five per cent.

I wouldn’t be surprised if changes are made to the full expensing regime introduced in last year’s Budget.

Current rules allow companies to claim 100 per cent of capital allowances on qualifying plant and machinery investments, letting them write off the costs in one go and seeing taxes cut by 25 per cent for every pound invested.

The scheme is very generous and should encourage investment. However given that it is currently unlimited we could well see the rules tweaked or limited.

Another possibility is the removal or restriction of Inheritance Tax (IHT) reliefs, such as business relief which can stand at either 50 per cent or 100 per cent, depending on the circumstances of the shareholding and asset ownership.

Changes could be the introduction of a monetary limit, or the imposition of more stringent criteria.

Higher taxes are rarely welcomed by the business community. However business owners can at least try and anticipate what’s coming down the pipe and do their best to prepare accordingly.

Clare Boden is a corporate tax director at the Bristol office of Haines Watts

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