On the 15 March 2023 Jeremy Hunt's much anticipated first budget as chancellor was delivered, and many of those measures are now in effect as of April.
Hailed by the Government as a budget that will boost the UK’s economy over the next 12 months, and the claim that with this budget it is likely that a technical recession will be avoided. As professional local accounting services providers we have been analysing the budget and what it means for our clients.
The Chancellor also continues to maintain that it is expected that the rate of inflation will fall to 2.9% by the end of the year, and the Bank of England will continue to focus their policy and strategies on targeting a long-term inflation rate of just 2%.
Confident statements but let's run through some highlights.
Main Highlights
As most of our local accounting customers are businesses, let's start with business taxes.
So a major change is that the main rate of Corporation Tax will be 25% for Companies with profits of £250,000 or more. A Small Profits Rate of 19% will exist for Companies with profits of £50,000 or less. The main rate will taper in between £50,000 and £250,000.
The Effective Corporation Tax rate at various profit levels will be:
Profits: £50,000 - £75,000 - £100,000 - £150,000 - £200,000 - £250,000
CT Rate: 19.00% - 21.50% - 22.75% - 24.00% - 24.63% - 25.00%
Confused? Part of the local accounting services we provide for small businesses is to look at strategies to keep your business below that profit threshold, so make sure you talk to us and we will make sure everything is clearly explained.
HMRC will also be implementing a new capital expenditure tax relief measure that will offer relief to help businesses with qualifying plant, machinery and IT equipment purchases.
The super-deduction regime will end on 31st March 2023, and will be replaced from 1 April 2023 with ‘full expensing’ 100% capital allowances for qualifying plant and machinery. This will last for three years, to 31 March 2026, although the Government indicated that it is their ambition to make this permanent.
The Government will also introduce 50% first year allowances for ‘special rate’ plant and machinery, including long life assets. These rules apply only for corporation tax purposes, and will not be available for businesses which are subject to income tax, unless they are below the Annual Investment Allowance threshold of £1m per annum.
The Government has also confirmed that the 100% first-year allowance for qualifying expenditure on electric vehicle charge-point equipment will be extended until 31 March 2025 for corporation tax, and 5 April 2025 for income tax.
Make sure you consult us before making any capital equipment purchases to ensure they qualify.
Do you have a small or medium-sized business that is carrying out research and development?
To help encourage innovation in the economy, Mr Hunt further announced in the spring budget significant support for R&D intensive Small and Medium Sized Enterprises (SMEs), via an enhanced rate of tax relief for loss making companies; and for the UK’s world leading creative industries, through increased audio-visual tax reliefs.
There is to be a tax credit worth £27 for every £100 your business spends, if 40% or more of your total expenditure is on research and development (R&D). We get asked lots of questions about this sector and the qualification rules so please take advantage of our premium local accounting services and let us guide you.
Childcare, Pensions and Investment Zones
The announcement that there is to be an expansion of free childcare to include all children from 9 months of age to 2 years old for up to 30 hours per week, could be good news for businesses and was welcomed by both sides of parliament.
Government records show that there are around 435,000 people in England with a child under 3 who are inactive due to their caring responsibilities; many of these people report that they would like to work but cannot afford childcare. The government is significantly expanding the support on offer by providing 30 hours a week of free childcare for 38 weeks a year, for eligible working parents of children aged 9 months to 3 years.
This will be rolled out with HMRC in phases from April 2024 and is in addition to the 30 hours a week already provided for eligible working parents of 3 to 4-year-olds. The government will also provide £204 million in 2023-24, increasing to £288 million in 2024-25, to substantially uplift the hourly funding rate paid to providers to deliver the existing free hours offered in England.
This will help with the cost of living and support education for the youngest children, by removing one of the biggest barriers to parents working.
Naturally there are conditions that will apply, so use our local accounting services to find out more, but you might be able to offer your part-time workers more hours or increased flexibility to suit your business.
The chancellor announced two new significant pension changes that you should be aware of.
Workers aged over 50 left the labour market in significant numbers during the COVID-19 pandemic. To encourage this group to extend their working lives, the government is increasing tax relief on pensions.
The Lifetime Allowance charge will be removed from April 2023 before the Allowance is abolished entirely from April 2024, and the Annual Allowance will be raised to £60,000. These reforms will help ensure that high skilled individuals are not disincentivised from remaining in the workforce.
Small business owners will now have more opportunity to invest carefully and plan for retirement. We are here to help.
The Chancellor also announced the creation of 12 Investment Zones across the UK, with the stated aim of helping drive economic growth and “levelling up” the country.
The confirmed locations include the West Midlands, Greater Manchester, the North-east, South Yorkshire, West Yorkshire, East Midlands, Teesside, and Liverpool.
Each English Investment Zone will have access to £80m over 5 years, including a single five-year tax package matching those proposed in Freeports, enhanced rates of Capital Allowance, Structures and Buildings Allowance, and relief from Stamp Duty Land Tax, Business Rates and Employer National Insurance Contributions, and grant funding to address local productivity barriers.
The Government has invited local partners in those eight areas in England to begin discussions on establishing Investment Zones.
If you are in this sector and require local accounting services and advice, just call us.
Other budget changes that affect your business
In a boost for the hospitality sector in which there are thousands of businesses operating in the East Midlands, Mr Hunt announced measures that will see draught beer duty prices being set at 11p lower than in supermarkets.
And it was good news for logistics managers and transport businesses in our region, as UK fuel duty is to remain frozen, thereby maintaining the 5p cut.
The Government's Energy Price Guarantee (EPG) that was brought in to help households with rising energy bills will be kept at £2,500 for an additional three months from April to June, saving a typical household £160. It had been due to increase to £3,000 in April but will now remain in place until 1 July 2023. Experts have predicted that energy prices will start falling this summer, so keep an eye out for better deals.
However, the government’s Energy Bill Support Scheme (EBSS) ends in March. This means you’ll no longer receive the vouchers or payments of £66 or £67 a month towards your bills.
The government has also said that it plans to end the extra costs that those with prepayment meters pay. The government is addressing one of the things that cause prepayment meter users to pay more than direct debit. This should make it fairer.
In welcome news for thousands of foster carers across the UK, there will be additional help for foster carers, as the government will nearly double the care relief threshold to £18,140 to give a tax cut to a qualifying carer, in addition to up to £450 tax relief per week depending on the age of the child. For example, a foster carer fostering 2 children over the age of 11 for the whole year would be able to earn up to £64,940 from fostering without paying any tax. This is a very generous allowance!
Final Words
There are still some elements to the budget that need clarification and that the government has yet to issue final confirmation statements. As ever on behalf of our clients, Brealey and Newbury Accountants have our fingers on the pulse.
For quality local accounting services and advice, contact us today.