Last week, the Chancellor Jeremy Hunt released his last budget before the expected General Election later in the year. It did not contain any major surprises and has elicited mixed reactions from the distribution and logistics industry. What are the key takeaways for the sector?
National Insurance Cuts
The Chancellor cut the main rate of national insurance contributions (NIC) paid by workers; the Primary (Employee) Class 1 NICs category. This cut is effective from 6 April 2024, and is in addition to the 2 per cent cut announced in the Autumn statement.
Distribution and logistics leaders need to make sure that their Payroll software and systems are adjusted to the new rate of contributions. For those using Advanced’s Payroll solution, legislative changes are made within the software – dealing with regulations so you don’t have to. Despite the short notice period we have worked to ensure that this NIC cut rate is already included in the year-end release.
Full expensing to leased assets
Hunt announced that draft legislation would be published on extending full expensing to leased assets. Full expensing provides tax relief for businesses investing in their company growth, by providing a 100 per cent capital allowance for certain vehicle, equipment and machinery investments in the first year they are bought. This allows you to deduct the full cost of qualifying assets from your corporation tax calculations.
Previously, this did not apply to leased vehicles. Although the Government has not made a final commitment yet, drafting the legislation to extend the full expensing to leased assets is an important step, especially for growing distribution and logistics companies who are in the position to expand operations but not buy entire new fleets.
Also helping smaller businesses, the Budget brings a rise of £5000 in the threshold small companies must register to pay VAT, from £85,000 to £90,000 – however, many are saying the change is too little.
Freeze on fuel duty
Hunt announced a freeze on fuel duty for another 12 months, which will be welcomed by distribution and logistics companies managing extensive fleets.
What are the trade body reactions to the Budget?
Logistics UK has reacted positively, lauding the fuel duty freeze, as an important ease in pressure for a sector facing mounting costs. The Road Haulage Association has also expressed support for this change and the expensing on leased assets, although expresses that the Chancellor has missed the opportunity to provide short-term support for haulage operators. CEO Richard Burnett suggests that a temporary suspension of the HGV Levy as well as incentives for the take-up of alternative fuels would have been helpful
In all, this was a mixed budget for distribution and logistics firms and there have been no drastic changes to the landscape. Reactions will largely depend on size of business, and for many only the National Insurance cuts will have a direct impact, with the savings from the fuel freeze minimal. Some will argue that the Budget is glaring for its absences, for example in substantial measures to ease pressure on exporters and to combat the skills shortage. Stay tuned to Advanced for further updates on legislative changes ahead of the General Election.