Small Business VAT Threshold Increase and Rates Freeze to Boost the UK Economy
Small businesses have received a significant boost with the VAT registration threshold raised from £85,000 to £90,000, and a £4.3 billion business rates relief package coming into effect. This measure, coupled with freezing the small business rates multiplier for the fourth consecutive year, aims to support over a million properties and encourage investment and growth.
VAT Threshold Increase to £90,000
Recognising the inflationary pressures facing small businesses, the government has increased the VAT registration threshold to £90,000. This change will free 28,000 small businesses from paying VAT, allowing them to invest more in their operations and growth. The UK now boasts the highest VAT threshold among EU and OECD countries, highlighting its commitment to a business-friendly environment.
Exchequer Secretary to the Treasury, Gareth Davies, remarked, “We’re rewarding work and backing Britain’s small businesses– the lifeblood of the economy and beating heart of communities – with support on VAT and business rates. Combined with our decisive action to reduce inflation from over 11% to 3.4%, these measures will help ensure the local, independent businesses that many of us cherish most will continue to thrive and help our economy grow.”
Freezing Business Rates Multiplier
The small business rates multiplier has been frozen for a fourth consecutive year, protecting over a million ratepayers from a potential 6.6% increase in their bills. This initiative is part of a broader £4.3 billion business rates support package, including a 12-month extension of the 75% relief for 230,000 Retail, Hospitality, and Leisure (RHL) properties.
Enterprise Nation’s Head of Policy & Government Relations, Daniel Woolf, welcomed the support, saying, “Freezing business rates for the fourth year running offers some stability for over a million small property owners. Extending the 75% discount for retail, hospitality, and leisure firms will see 230,000 businesses breathe a sigh of relief.”
Encouraging Investment and Growth
These measures align with the government’s ‘Help to Grow’ initiative, aimed at making 2024 the year of the SME. By reducing the administrative burden and operational costs for small businesses, the government is laying a robust foundation for sustainable growth. The uplift in the VAT threshold and the business rates freeze will provide much-needed stability and predictability, encouraging small businesses to invest and expand.
Tina McKenzie, Policy Chair of the Federation of Small Businesses (FSB), expressed support, “This is a big day for small businesses. FSB has campaigned for decisive action to increase the VAT threshold, freeze business rates, and extend the retail, hospitality, and leisure discount, and we’re pleased to see these come in today.”
Long-Term Vision for Small Business Growth
The government’s holistic approach to supporting small businesses, including the National Insurance cut for the self-employed and comprehensive ‘Help to Grow’ initiative, underscores its commitment to economic prosperity. The policy measures not only provide immediate financial relief but also foster a resilient business ecosystem primed for innovation and competitiveness on the global stage.
As part of the £1 billion tax relief package announced in the Spring Budget, film studios across England will receive 40% relief on gross business rates bills until 2034. This £470 million tax cut ensures the UK remains an attractive destination for film and TV production, supporting the growth of the £11.9 billion sector.
With these strategic initiatives, the government is championing the cause of small and medium-sized enterprises (SMEs) in the UK. By creating a supportive environment for innovation and growth, the future for UK small businesses, including most unicorn startups, looks promising and luminous.
Conclusion
These initiatives collectively underline the government’s resolve to back small businesses, ensuring they remain the beating heart of communities and the economy. The measures will help small businesses, including most unicorn startups, to thrive, invest, and grow, contributing to the broader economic prosperity of the UK.
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