Today (Wednesday 6 March) Chancellor Jeremy Hunt announced the Spring Budget in the House of Commons. The announcement included a VAT registration threshold increase, a cut to national insurance by 2p, and an extension on government loan scheme for small businesses. Jeremy Hunt has said the OBR expects the economy to grow by 0.8% this year and 1.9% next year – 0.5% higher than the autumn forecast, as reported by BBC, adding this growth is expected to continue on this trend until 2027.
Key Points
- A VAT registration threshold increase from £85,000 to £90,000 from 1 April.
- A cut to national insurance by 2p from 6 April.
- An extension on Covid-era government loan scheme for small businesses until March 2026.
- A continuation of government fund for those struggling with cost-of-living pressure for another six months.
- Increase to child benefit earning threshold.
The Industry’s Response
Caroline Larissey, Chief Executive at the National Hair & Beauty Federation said:
"We’re pleased that the Government has answered our call for changes to VAT with the raising of the VAT threshold, taking into account inflation. However, there’s more to do. We welcome further discussions with HM Treasury around future VAT reform to ensure a fairer system and to help level the playing field in the hair and beauty sector, including options for reduced rates and tiered rates around the threshold.
"However, the silence was deafening on support for apprentices. National Insurance (NI) cuts will benefit the self-employed but where is the support for employers? With wages rising in April, few small and micro sector businesses can afford to take on staff and apprentices and grow the sector. We call on the government to support these businesses, largely female entrepreneurs, bolstering the high street and championing wellbeing in the community."
Toby Dicker, co-founder and owner of The Chapel Salon in Tunbridge Wells, shared:
"My personal take on it would be that it's a cynical, vote-winning exercise with no real substance;l they are so out of touch with what SMEs in this country need and I fear that it could be the end of Apprenticeships in our sector. PAYE, VAT paying salons are now at such a commercial disadvantage and apprenticeships are so costly that many will no longer employ apprentices at all. Most are now faced with the decision to change their business model or go out of business and this will cost the treasury and the taxpayers millions.
"It's fantastic that individuals get more in their pay packet and that the national minimum wage has been increased but these measures are paid for by small businesses, not by the government, and with no support in the form of levelling the tax playing field, many of these employers will be forced out of business.
"This budget just made the scales tip further away from level and we'll be thinking about perhaps changing our strategy and our businesses as things go forward."
Collette Osborne, Chief Policy Officer at The Hair and Barber Council, shared:
"A budget for votes with slight of hand. If this wasn’t tinkering I don’t know what was. But there were some 'hidden' pledges which will likely impact our sector. HMRC will be given the resources they need to collect in £4.2 billion from people who owe taxes, while there was recognition that the tax system is unfair – these two areas combined signal we will get a level trading field. The personal tax threshold is unchanged, so with the NMW increases in April more will be paying tax – so the National Insurance cut is offset by people paying more tax. This is why he pledged to level the tax paying field, as many would soon pick up on this. While the VAT threshold was raised, as inflation has been so high this does very little to help our sector, despite calls for a VAT cut going unheard. One thing has been made clear that any smoothing mechanism is far too complicated and has already been disregarded by the government.
"Disappointing as no mention of apprentices or the high street. In all a disappointing budget clearly comprised in an attempt to gain votes, which has likely backfired."
CEO and chair of BABTAC and CIBTAC, Lesley Blair MBE said:
"The ongoing cost-of-living crisis has affected everyone and remains a huge concern for many beauty businesses. We’re hopeful that this budget will offer some relief, welcoming in particular the increase to the VAT threshold, given our ongoing appeals to government for VAT reform for our sector.
“However, as one of the hardest hit industries during and post-pandemic (estimated to be an average financial loss of £11,603 on earnings), we believe far more needs to be done to encourage the emergence of new talent and growth in our sector. Not only are we a proven leading contributor to UK economy, but also a sector unique in our ability to improve the wellbeing of society, while supporting the revival of the British High Street. We believe more support should therefore be forthcoming and will continue to liaise with government to secure this.”
