UK: In the Spring Budget 2024, Chancellor Jeremy Hunt revealed the government will freeze alcohol duty and cut National Insurance, as well as raise the VAT threshold for small businesses to £90,000.
In today’s Spring Budget, Hunt outlined plans to increase the VAT registration threshold from £85,000 to £90,000 for small businesses.
The decision to maintain the 20 per cent VAT rate however, and not cut it to 12.5 per cent, has been criticised by hospitality operators.
Other key news announced in the Budget includes:
• The freeze on alcohol duty, which was due to end in August, has been extended until February 2025
• The Chancellor has cut workers’ National Insurance by another 2p, meaning that it falls from 10 per cent to eight per cent, and it will be worth £450 a year for the average worker
• An increase in air fares for business-class travellers
• From April 2024, the high income child benefit charge threshold will increase from £50,000 to £60,000, which the Chancellor claimed would lead to an extra 60,000 parents entering the workforce over the next four years
• The tax relief for holiday lets will be scrapped from April 2025
• The Office for Budget Responsibility [OBR] forecasts that inflation will fall below two per cent within the coming months
• The OBR also expects that the UK economy will grow by 0.8 per cent this year and grow by a further 1.9 per cent next year [0.5 per cent higher than the autumn forecast]
• The government remains “on track” to build one million homes across the country
• The UK is “on track to be the world’s next Silicon Valley” with the number of technology and artificial intelligence [AI] startups being founded and that can attract investment into the UK tech industry
Kate Nicholls, chief executive of UKHospitality, said: “A lower rate of VAT would have been a bold reform that would drive economic growth, keep prices down and unlock investment in the sector, one that was projected to grow six times faster than the economy as a whole. It would have been good for businesses, the public and the economy.”
Viv Watts, AGO Hotels co-founder, said: “We were hopeful that VAT Retail Export Scheme would be restored in the Spring Budget. However, this was not the case and we will continue to see our tourism sector decline as European cities cash in on our government’s poor decisions.
“The cut to national insurance contributions (NICs) by another 2p will be welcome news for employees whose finances are stretched but may not make as big a dent as they hope after four years of increased interest rates and inflation. A cut in income tax would have put more money back into hard working people’s pockets,” Watts added.
Greg Hegarty, co-chief executive of PPHE Hotel Group, said: “At a time when bold steps are required to help the recovery and growth of these critical industries, the measures – or lack thereof – significantly fell short.
“The decision to maintain the 20 per cent VAT rate, coupled with the absence of other supporting initiatives to counteract the deterrent effects of the ‘tourist tax’ and the implications of Brexit on the VAT retail export scheme, signal a concerning disregard for the challenges these sectors face. Moreover, the forthcoming complexities in wine taxation only add to the burden,” Hegarty added.
Tim Wheeldon, managing director at Zeal Hotels, said: “We are pleased that the Chancellor has announced funding for manufacturing and R&D projects, including increased support for zero carbon aviation and green industry initiatives.
“However, we fear that the money on offer is not enough to counter the underinvestment the UK is facing when trying to deliver on net zero goals. Once again, it will fall to industry to act alone on an issue which should be government’s primary concern,” he added.
John Webber, head of business rates at Colliers, said: “We were disappointed to see that the Chancellor did not extend the retail, hospitality and leisure relief for small companies that he announced in November. The temporary nature of the relief requires an annual review which leaves many businesses unable to plan for more than a year in the future. No pub, restaurant, café or small shop can realistically plan for the future if they are peering over the cliff edge of a 75 per cent increase in their rates bill next year. The Chancellor should have given these businesses some confidence by confirming that the relief will be in place until at least until the next revaluation in 2026.
“All in all a very disappointing Budget in terms of business rates. The Chancellor spoke of creating a tax regime pro-business, designed for further “levelling up” and competing on the European stage. Yet nowhere else in Europe do businesses pay approaching 60 per cent the rental of their premises in property taxes and at current levels this is unsustainable and deters new investment in businesses,” Webber added.
Ben Edgar-Spier, head of regulation and policy at Sykes Holiday Cottages, said: “Putting pressure on holiday let owners will not solve the housing crisis but instead risks impacting the very businesses that support tourism spend and employment in communities across the country.”
Additional industry reaction to the Budget:
Alistair Handyside, chair of PASC [Professional Association of Self Caterers] UK, said: “Increasing the tax burden on holiday properties across England’s coasts and countryside will drive scores of thousands from this traditional British sector, as the economics of providing holiday accommodation will simply no longer add up.
“This won’t just be to the detriment of those who currently own and rent accommodation – providing affordable and accessible options to families who want to holiday in the UK – it will strip from local economies tens of thousands of associated jobs which rely on the sector, such as roles in cleaning, pubs, cafes and tourist destinations,” Handyside added.
Brendan Geraghty, CEO of the UKAA [UK Apartment Association], said: “We welcome today’s announcement of £242 million of investment in Barking Riverside and Canary Wharf, which will see 8,000 homes built according to the Chancellor, many of which we hope will be delivered by the BTR sector. The government itself estimates that 300,000 new homes are needed per year. Yet the planning system remains the biggest obstacle to new home delivery and urgent reform is required.
“Analysis by Savills suggests that up to one million additional homes will be required in the private rented sector by 2031 to meet growing demand and build-to-rent, by its inherent nature able to build at scale and at pace, can play an important part in this delivery.
“The UKAA calls on government to encourage more local authorities to support the role of BTR homes in their communities benefiting both individual households and whole communities, with BTR schemes serving as an anchor tenant in wider regeneration plans,” Geraghty added.
Mark Buddle, head of residential development at property consultancy Bidwells, said: “The absence of measures to address the national housing emergency is astonishing. Financing pressures and an antiquated system have squeezed badly-needed housing delivery, with rents soaring across the country due to the chronically undersupplied market.
“Whether or not we provide solutions to this problem could be the defining political question of this generation. Without support for housing delivery, the UK will be unable to attract workers in areas of high productivity, which will only serve to entrench stagflation, low economic growth and increase the tax burden in the long-term,” he added.
Nigel Green, CEO of deVere Group, said that the Spring Budget and increasing tax burdens would make more “hard-working people across the country look for work and life opportunities overseas”.
