What does the Spring Budget 2023 mean for small businesses?
Posted on 24th April 2023
The Spring Budget 2023 in March took place alongside an independent report on the UK economy from the Office for Budget Responsibility (OBR). The OBR says the UK won’t now enter a ‘technical recession’ this year. That’s good news, but small businesses still face many challenges. Does the Budget help?
A number of the Chancellor’s announcements are significant. Here’s an overview.
Energy Price Cap
The energy bill price cap increase has gone ahead this month. Businesses will automatically receive a discount on wholesale prices of gas and electricity, rather than a fixed price. The new Energy Bills Discount Scheme will provide a discount on high energy costs until 31 March 2024. The Energy and Trade Intensive Industries (ETII) discount provides additional support for businesses in eligible sectors and requires registration.
Childcare Costs
Parents of children aged between nine months and two years will receive 30 hours of free childcare per week. This measure is to be phased in between now and September 2025. Childcare providers will receive an increase in the hourly rate paid by government from September 2023. Childcare support for parents on Universal Credit will also increase, paid in advance, rather than as a refund.
Fuel Duty
The 5p reduction in fuel duty which was due to end on 31 March is extended to April 2024.
Corporation Tax
The previously announced increases in Corporation Tax has gone ahead this month meaning businesses now pay between 19% and 25%. The rate will depend on profits up to £250,000. Directors and stakeholders are likely to be affected since their dividends are paid on profits after tax.
Investment Zones
New investment zones, including one for the West Midlands, are intended to help encourage business investment. Each is to receive funding of up to £80million for skills, infrastructure, tax reliefs, and business rate retention.
Business Investment Allowances
The Annual Investment Allowance (AIA) which you can deduct from your taxable profits is permanently increased to £1million. New full expensing arrangements allow you to deduct the cost of investment in new IT equipment, plant, or machinery immediately from your taxable profits for the year. This will reduce your tax by up to 25p for every pound invested and will apply alongside allowances for older investments.
Tax credits for small loss-making businesses with at least 40% expenditure on research and development (R&D) are revised. Extensions to tax relief for film, TV, and video gaming companies are also expected.
Tax on pensions
Abolishing the pensions Lifetime Allowance is intended to keep people in work for longer. This applies to the amount you can save for your pension before you pay tax. The annual pension tax-free allowance also increases from £40,000 to £60,000. This could be a tax effective option for business owners who want to save for retirement.
Training for over 50s
The government’s Skills Bootcamps will now include the over 50s. This will provide free training in sector-based skills for up to 16 weeks. Participants are guaranteed an interview with an employer at the end of the course. As an employer this can help you find trained staff and you can influence course content to address skills shortages.
Please get in touch if you would like help to review how the Spring Budget will affect your business.
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