March 19, 2024 Budget 2024: VAT and ISAs
VAT’s a wrap
Last week’s Spring Budget brought some good news for businesses and sole traders, with Chancellor Jeremy Hunt announcing an increase in the VAT threshold from £85,000 to £90,000 from 1 April 2024. The rise, which is the first since 2017, is designed to help business owners who often defer growth for fear of breaching the threshold.
With more than 28,000 businesses set to benefit in 2024-25 from no longer having to be VAT registered, the raising of the threshold is poised to cost the Treasury £150m in 2024-2025, increasing to £185m in 2025-2026.
While the announcement will come as a welcome boost for businesses, at just £5,000, it is unlikely to be a game-changer – and many feel that the Chancellor has not gone far enough. While upping the threshold will stimulate growth for businesses that have previously deliberately avoided the £85,000 limit, many feel that the Chancellor has missed a golden opportunity to take a bolder stance and stimulate the growth that the UK’s economy needs.
A nicer type of ISA?
Chancellor Jeremy Hunt’s Spring Budget announced the creation of a new British ISA designed to enable UK savers to capitalise on the growth of the most promising UK businesses. The new ISA will allow savers an extra £5,000 a year on top of existing allowances for investment in UK equity – with all the tax advantages that come with other types of ISAs.
Given that so few people currently use up their total ISA allowance in any tax year, the promise of an extra £5,000 will be more attractive to the high-net-worth end of the investor spectrum and is likely to win most favour amongst those currently pushing the current £20,000 ISA limits.
The new British ISA will give investors the knowledge that their investment will stay within the UK, and sends a strong message that the Government is backing British businesses and channelling a substantial chunk of taxpayer-subsidised investment into boosting UK growth, productivity and employment.
The plans for a British ISA are still under consultation (including how British equities will be defined), and any launch is unlikely to be until April 2025 however, the announcement was not without controversy. Some expressed concerns that the BISA will have an unintended side effect – including encouraging people to concentrate their investments in UK equities alone, whether it’s right for them or not, and exposing their savings to an unnecessary level of risk.
