Spring Budget: A Summary for Business Owners

Chancellor Jeremy Hunt delivered his Spring Budget announcement on Wednesday, 15 March, setting out the government's tax and spending plans, accompanied by a forecast from the OBR.

The Chancellor has claimed Britain will become the best place to invest in any advanced economy after the chancellor put £9bn of business tax breaks at the heart of his “Budget for growth.”

Hunt arrived in the House of Commons with new official forecasts showing the UK would avoid a technical recession in 2023. During his one-hour statement, Hunt insisted he had restored economic stability after the chaos of the Liz Truss premiership last year and that inflation was under control and confidence returning.

Here’s what small businesses need to know:

Energy bill support

As expected, the Energy Bills Discount Scheme (EDBS) will replace the Energy Bill Relief Scheme (EBRS) for businesses from 1st April. This means businesses will get a discount on wholesale gas and electricity prices rather than a fixed price. The Energy Bills Discount Scheme is set to run until 31 March 2024.

For households, the Energy Price Guarantee (EFG) has been extended for three months (April, May, and June). The government says this would save a typical household £160 a month from April. The energy rebate scheme - paid directly to customers in six installments of £66 and £67 a month - has not been extended and will end this month.

Corporation tax is increasing

Corporation tax is paid on company profits and is due to increase from 19 percent to 25 percent on 1st April. This was something Rishi Sunak announced as chancellor in his March 2021 Budget.

This higher rate will be paid by limited companies on profits over £250,000 made from trading and from the sale of assets or investments. Hunt says only 10 percent of companies will pay the full 25 percent rate.

If your company has profits of £50,000 or less, you’ll pay a Small Profits Rate (SPR) of 19%. Any profits between £50,000 and £250,000 will be eligible for marginal relief. You can calculate marginal relief for corporation tax here.

The ‘super-deduction’ will end on 31st March and be replaced with 100% first-year allowance ("full capital expensing") for qualifying capital expenditure. This means that every £1 a company invests in IT, plant, or machinery can be deducted in full from taxable profits. Hunt announced the measure for the next three years but intends to make it permanent "as soon as we can responsibly do so".

VAT threshold extension

There will be a two-year extension to the £85,000 turnover threshold at which businesses must start paying VAT.

Capital gains tax

If you’ve had an asset for more than a year and its value has gone up, you’ll be charged capital gains tax when you sell it. From 6 April 2023, the capital gains tax-free annual allowance will be cut from £12,300 to £6,000, then to £3,000 from April 2024.

Annual Investment Allowance (AIA)

The annual investment allowance (AIA) provides 100% tax relief on certain assets and is designed to encourage people to invest in growing their businesses.

AIA includes most plant and machinery but excludes cars, items you owned for another reason before you used them at your business, or items given to you or your business. The maximum claim amount of £1 million will continue past April 2023.

Seed Enterprise Investment Scheme (SEIS)

The amount of investment that companies will be able to raise under the SEIS will increase from £150,000 to £250,000 from 06 April 2023.

Research & development relief

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. As well as tax reliefs for film, TV, and video gaming businesses.

Pensions savings threshold increased

Pensions were a key update in the Budget as the government looks at ways to keep people at work and drive the economy.

The chancellor has announced that the pensions Lifetime Allowance will be abolished. This affects the amount you can save in your pension pots before you start paying tax. Hunt also said the annual pensions tax-free allowance will increase from £40,000 to £60,000.

Beer tax frozen

Tax relief of 11p has been announced on draft drinks served in pubs from 1st August - so a pint will be cheaper than in supermarkets.

5p fuel duty cut extended

An extension of the 5p cut in fuel duty for the next twelve months. The chancellor said that fuel duty will not increase in line with inflation.

Other measures that may be of interest:

• Introduction of ‘Returnerships' - similar to apprenticeships, but targeted at the over-50s, to encourage them to upskill and get back to work.
• £63m fund for public pools and leisure centres.
• Theatres, Orchestras, and museums will have tax reliefs extended for two years.
• £100m fund for local charities and community organisations.

If you'd like more information, you can view the full 2023 Spring Budget here.