Spring Budget 2023

In the wake of today’s Spring Budget announcement by Chancellor Jeremy Hunt, it’s evident that the measures put forth offer little relief or support for small businesses across the UK. Despite the government’s emphasis on encouraging individuals to rejoin the workforce and stimulating business investment, the initiatives announced largely overlook the unique challenges faced by small businesses, leaving many entrepreneurs feeling underwhelmed and underserved.

Here are some of the key points from the announcement, as always the devil is in the details, the Finance Bill will be published next Thursday which should provide further clarity.

Key Measures

Corporation Tax
As expected, the main rate of corporation tax will increase from 19% to 25% for businesses with taxable profits over £250,000. The chancellor defended the measure, stating that we are still the lowest headline Corporation Tax rate in the G7 as well as estimating only 10% of companies will pay tax at the upper rate.
The increase will only affect profits above £50,000 which remain taxed at the current 19%, and after that increases at a tapered rate up to the full 25% at £250,000 of profits.

Full expensing allowance of assets
The government introduced a new full expensing, 100% allowance from 1 April 2023 on expenditure of new plant and machinery to replace the expiring Super Deduction. However this does nothing for small business owners as they are already enjoying the same benefit under the Annual Investment Allowance.

Research & Development
An “enhanced credit” has been introduced for small and medium-sized businesses if they spend 40% or more of their total expenditure on research and development. They can claim credit worth £27 for every £100 spent.

Pensions
The cap on lifetime pension savings before paying extra tax will be abolished, and the tax-free yearly allowance for pension pots will rise from £40,000 to £60,000.

Energy Sector
Government subsidies limiting typical household energy bills to £2,500 a year will be extended for three months, until the end of June.
There was no extension of this support for business energy. Additionally, £20bn will be invested over the next two decades in low-carbon energy projects, focusing on carbon capture and storage.

Free Childcare
One of the most anticapted announcements today was the extension of 30 hours of free childcare to one and two-year-olds. However the measures are not being implemented immediately. Working parents of two-year-olds will be able to access 15 hours of free care from April 2024 onwards. This will then be extended to all children from 9 months upwards from September 2024. Finally from September 2025 every single working parent of under-fives will have access to 30 hours free childcare per week.

Increasing employment
Universal credit will see increased childcare support, and “skills boot camps” will be offered to encourage over-50s who have left their jobs to return to the workforce.

Economy
The UK is predicted to avoid a recession in 2023, but the economy will shrink by 0.2%. Growth is expected at 1.8% next year, with 2.5% in 2025 and 2.1% in 2026.

You can read more about the rest of today’s announcements here