17th March 2023
On 15 March, Chancellor Jeremy Hunt gave his Spring Budget announcement, focusing on business investment and growth but set against a challenging economic landscape.
The accompanying Office for Budget Responsibility (OBR) report showed that the UK economy has contracted less than expected, enabling the Chancellor to announce some new spending and tax measures. The government hopes these will help businesses plan for the future. We report on many of the changes for businesses below.
There have been some increases in allowances in particular, which mean it is well worth revisiting your pension plans to check you are maximising your opportunities to save. Also there is an increase to R&D Relief for those investing in research and development.
If you would like to discuss any of the measures in the Spring Budget 2023, we’d like to hear from you, so do contact us.
Capital allowances
Corporation Tax – take advantage of the new temporary deduction for investing in your business
The main rate of Corporation Tax, which businesses pay on taxable profits over £250,000, will rise from 19% to 25% as announced previously by the government. Small businesses with profits of less than £50,000 will continue to pay 19% and the rate increases gradually as a company’s profits rise.
But the Chancellor also announced a temporary scheme to allow companies to reduce the amount they pay if they invest in their firms. Businesses can subtract money they invest in items like IT equipment and machinery from the profits they pay Corporation Tax on for the next three years.
With the 130% Super Deduction allowance ending on 31 March, to offset some of the expense of capital expenditure, Jeremy Hunt has announced ‘full expensing relief’ for three years, to 2026. This will provide for 100% relief for the cost of most items eligible for capital allowances, with a 50% rate applying to special rate assets. It will only be available on new and unused assets. It will also only apply to companies; unincorporated businesses will only be eligible for the £1m annual investment allowance, or full expensing through use of the cash basis of taxation.
100% first year allowance extended
100% first year allowance for qualifying expenditure on plant and machinery for electric vehicle charging points will be extended by a further two years to 31 March 2025 for Corporation Tax purposes and 5 April 2025 for Income Tax.
R&D credit for SMEs
The Chancellor announced an increased rate of R&D relief for SMEs from 1 April 2023. Eligible companies will receive £27 from HMRC for every £100 of R&D investment if they spend 40% or more of their total expenditure on research and development.
Reliefs for creative industries reformed and extended
Film, TV and video games tax reliefs will be reformed from 1 January 2024 and will become expenditure credits instead of additional deductions.
The temporary higher rates of theatre tax relief (TTR), orchestra tax relief (OTR) and museums and galleries exhibitions tax relief (MGETR) have been extended for two years. Rates of relief for TTR and MGETR remain at 45% for non-touring productions and 50% for touring productions. These will taper to 30% and 35% from 1 April 2025 and 20% and 25% from 1 April 2026. OTR rates remain at 50%, and will reduce to 35% from 1 April 2025 and to 25% from 1 April 2026. The MGETR sunset clause will be extended for a further two years until 31 March 2026.
Pensions and employment
The government’s wish to encourage people (especially over 50s) back into work was backed up by some new incentives – which will be of benefit to anyone with an eye on their private pension savings.
Lifetime limit on tax-free pensions savings removed
The pension lifetime allowance – the maximum amount of pension savings a person can build up over their career without having to pay more tax – is currently capped at £1,073,100 but the limit is being removed from 6 April 2023.
The current allowance applies to private pensions only (defined benefit and defined contribution) – not the government state pension.
The annual pension allowance limit is increasing
From 6 April, the annual pension allowance – the maximum amount an individual can pay into their private pension each tax year without a penalty – it increasing to £60,000 from the current limit of £40,000.
The money purchase annual allowance is increasing
In good news for those who have started drawing some of their defined contribution pension but continue to work and save more, the money purchase annual allowance is increasing from the current £4000 to £10,000 from 6 April.
Free childcare and changes to benefits
30 hours of free childcare for working parents in England has been expanded to include one and two-year-olds. This will be rolled out in stages from April 2024.
Fuel duty has been frozen
The 5p cut to fuel duty on petrol and diesel which was due to end in April has been extended for another year.
Energy bills
While the Energy Price Guarantee limiting average household energy bills to £2,500 annually has been extended until 30 June (when energy prices are predicted to fall), there will be less energy support for many businesses. For them, the Energy Bills Discount Scheme replaces the Energy Bill Relief Scheme on 1 April and will run until 31 March 2024. This mainly caters for high energy consumers so not all businesses will be eligible for support – more details here.
Commitments on Green – and nuclear – energy
The government has committed to investing £20 billion on low-carbon energy projects over the next two years. But it has also announced that nuclear power will be classed as environmentally sustainable for investment purposes.
Levelling Up
Investment Zones were mentioned again but this time with more detail. 12 new investment zones will have access to ‘interventions’ worth £80 m over five years, including enhanced rates of Capital Allowance and Structures and Buildings Allowance. They will also get relief from stamp duty land tax, business rates and employer’s national insurance contributions. Flexible grant funding will support skills, apprenticeships, business support and infrastructure.
Jeremy Hunt also announced £200 m in funding for local regeneration projects, and a further £161 m for regeneration in Mayoral Combined Authorities.
So there were some positive measures in the Chancellor’s announcement – if you would like to discuss any of them with us, do contact us.
More detail on the Spring Budget can be found on the government’s website here.
