On Wednesday March 15 Jeremy Hunt presented the Spring budget 2023.
He took a positive tone, leading with the news that the UK will not enter recession this year.
Mr Hunt said: “Today the Office for Budget Responsibility forecast that because of changing international factors and the measures I am taking, the UK will not now enter a technical recession this year.”
Alongside the Budget Mr Hunt announced big childcare reforms, aimed at making it easier and more affordable for parents to return to work after parental leave ends. This move was highlighted as a way to help UK businesses recruit skilled employees.
Below, we explore the announcements from the Budget that will affect small businesses.
Corporation tax increase confirmed
Hunt confirmed that corporation tax will rise from 19% to 25% in April. This has been a controversial area, although the government continues to assure that the UK is still a good place to start and grow businesses.
There will be a 19% ‘small profits’ rate for businesses that make less than £50,000 in annual profits, and marginal relief for companies that sit between the lower and upper rate for profits (£250,000).
Hunt re-confirmed that the UK will still have the lowest headline rate in the G7 and added that a 19% rate “did not incentivise investment” – which leads on to the next point.
Annual investment allowance for firms raised to £1m
The annual investment allowance has increased to £1m for small businesses. 99% of all businesses will now be able to deduct the full value of their investment from each year’s taxable profits.
‘Full expensing’ has also been introduced for the next three years, which means that all money invested in IT equipment and machinery can be deducted in full from taxable profits.
This will become permanent once the government is able to afford it. Mr Hunt claimed that the move will make the UK the only country in Europe with full expensing, and that ‘the impact on the economy will be huge.’ He billed it as a ‘corporation tax cut worth an average of £9 billion a year for every year it is in place.”
Abolishing the pensions Lifetime Allowance and increasing annual allowance to £60,000
As part of his plans to get older people back into work, the chancellor announced that the annual pension tax rate will increase. He highlighted that this is a key concern among senior NHS professionals who are leaving the health service because of unpredictable tax charges.
To prevent people being pushed out of the workforce for tax reasons, the pensions annual tax-free allowance is being increased by 50% from £40,000 to £60,000.
The Lifetime Allowance, currently limited to £1 million, is to be abolished entirely.
Fuel duty not increasing with inflation
On fuel duty, Mr Hunt said: ‘Because inflation remains high, I have decided now is not the right time to uprate fuel duty with inflation or increase the duty.’
He committed to maintain the 5p cut for a further 12 months and freeze fuel duty for the same time period.
Boosts for recruitment
Various measures aim to increase the size of the UK workforce. Funding is being made available to create up to 50,000 places on new voluntary employment scheme for disabled people, called Universal Support.
There will also be more places on ‘skills boot camps’ to encourage over-50s to return to the workplace. Immigration rules are to be relaxed for five roles in the construction sector to ease labour shortages.
New ‘AI sandbox’ to boost artificial intelligence businesses
The government is to launch an ‘AI sandbox’ to trial new, faster approaches to help innovators get cutting edge products to market and gain clarity on Intellectual Property rules.
The Chancellor is committing £900m of funding to implement recommendations for a supercomputer to create the power needed for AI’s complex algorithms.
He set a vision to be a ‘world leading quantum enabled economy by 2033.’
Want to explore in more detail what the latest rules will mean for you or your business? As leading small business accountants in the Lune Valley we’ll be pleased to advise. Get in touch with us today.