Spring Budget 2023: What the announcements mean for your business

Business taxes

The super-deduction ends on 31 March 2023. In place of it, the Chancellor unveiled two new capital allowance schemes: full expensing and the 50% first year allowance.

Full expensing

One of the most hotly debated issues facing the Chancellor has been investment allowances.

The good news is that the government has been more generous here. For instance, from April 2023 until the end of March 2026, companies can claim 100% capital allowances on qualifying plant and machinery investments.

It was also announced that this may be made permanent beyond 2026 if practical.

Full expensing is a 100% first-year allowance which means you can claim a deduction from your taxable profits that’s equal to 100% of your qualifying expenditure in the year you incurred that expenditure.

Full expensing will allow your business to write off the cost of investment all in one go and for every pound your company invests, its taxes are reduced by up to 25p.

The 50% first year allowance

Your business can also benefit from a 50% first-year allowance (FYA) for expenditure on special rate (including long life) assets until 31 March 2026.

That date was extended by three years – it had been due to end on 31 March 2023.

In addition, the Annual Investment Allowance (AIA) providing 100% first-year relief for plant and machinery investments up to £1m, is still available for all businesses including unincorporated businesses and most partnerships.

New R&D scheme for SMEs

An enhanced research and development (R&D) tax credit of 27% will be available to loss-making ‘R&D intensive’ small and medium-sized enterprises (SMEs) – those that spend 40% or more of total expenditure on qualifying R&D.

Eligible loss-making companies will be able to claim £27 from HMRC for every £100 of R&D investment, instead of £18.60 for non R&D intensive loss makers.

The new scheme, which is expected to help approximately 20,000 businesses, begins on 1 April 2023 and is said to be worth approximately £500m per year.

Corporation tax increase to remain

The Chancellor confirmed that from April 2023, corporation tax is going to rise from 19% to 25%.

Businesses with profits of more than £250,000 will pay the top rate of 25%.

For small businesses with profits of less than £50,000, they’ll continue paying a corporation tax rate of 19%.

That rate will have a gradual increase for businesses as their profits rise between £50,000 and £250,000.

New investment zones

The Chancellor unveiled a new scheme of 12 investment zones. The aim is to drive investment, with each zone receiving £80m of funding over five years, including tax reliefs and grant funding.

For England, eight mayoralty areas are on the shortlist to host investment zones. They are:

  • West Midlands

  • Greater Manchester

  • North East

  • South Yorkshire

  • West Yorkshire

  • East Midlands

  • Teesside

  • Liverpool.

There will also be at least one investment zone in Scotland, Wales and Northern Ireland.

Each zone will be based around a major research institution, most likely to be a top university, with the aim that the zone will become research and development hubs.

The money is intended to be used to improve skills, provide specialist business support, enhance the planning system – considered essential for growth – or to boost local infrastructure.

Work and pensions

Return to work support for the over 50s

Struggling to recruit staff?

Your business might well be encouraged by the Chancellor’s moves to entice older people back to work.

There are currently around 3.5 million people of pre-retirement age who are outside the UK’s labour force, a rise of 320,000 on pre-pandemic numbers.

With that in mind, there are reforms to the pension tax system to encourage the over 50s to come out of early retirement and to get back into the workplace.

And the Chancellor announced a couple of drives to boost the workforce: ‘returnership’ apprenticeships and midlife MOTs.

Returnership apprenticeships

The Chancellor described the returnership initiative as: “A new kind of apprenticeship targeted at the over 50s who want to return to work…

“They will be called returnerships, an offering alongside skills boot camps and sector-based work academies.”

The returnerships will be supported with £63m of additional funding but there are no timelines on when this programme will begin.

Midlife MOTs

The Department for Work and Pensions will increase the number of over-50s benefiting from midlife MOTs five-fold, from 8,000 to 40,000 a year.

A midlife MOT offers what the government describes as “free online support to encourage people in their 40s, 50s and 60s to make more active planning in the key areas of work, wellbeing and money. It is aimed at both employees and employers.”

Pensions

The annual pension allowance, the amount you can contribute to your private pension in a year without incurring tax, has been increased from £40k to £60k – it’s been frozen for the past nine years.

Meanwhile, the pension lifetime allowance of £1.07m is going to be scrapped, meaning people can make unlimited contributions to their pensions without incurring a tax charge.

The government hopes these measures will encourage people to stay in work for longer before they retire.

Childcare support for working parents

The Chancellor announced that from April 2024 and rolled out in stages, working parents of children aged between nine months and five years old will get up to 30 hours of free childcare. This will be fully implemented by September 2025.

That is something that’s currently only available to eligible parents of three- and four-year-olds.

The funding will start from the moment maternity and paternity leave ends. All parents in a household must work at least 16 hours a week at the minimum wage to qualify.

The Chancellor hopes that the change will encourage more parents to come back to work. And that could help to relieve staff shortages for businesses that have roles to fill.

In addition, it was announced that all primary schools will be offering wraparound care either in partnerships with other schools or on their own from September 2026.

Additional Budget announcements

Draught beer relief

Known as the new ‘Brexit pubs guarantee’, from 1 August 2023, the duty on draught products in pubs will be up to 11p lower than that in supermarkets.

Martin McTague of the FSB says: “The increase in draught relief will also go a long way to helping the Great British Pub.”

Fuel duty frozen

The Chancellor announced that fuel duty will be frozen.

In addition, the 5p reduction to fuel duty on petrol and diesel that was due to end on 31 March will now remain for an extra year.

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