Mr Hunt presented his March budget on 15th March 2023, as with previous budgets, many of the details were known in advance. Other changes that come into force from 6th April 2023 can be found here.
What was announced for the Spring Budget, 2023?
The good news is that UK PLC is in a better position than expected, with inflation predicted to fall to 2.9% by the end of 2023, which is a great indicator for business owners trying to get to grips with increasing costs.
Staffing has been a key challenge for most small businesses, and this budget aimed to alleviate this shortage by offering more funded childcare, extending the 30-hour free childcare to working parents of 1 and 2-year-olds, and providing more money to schools for wrap-around care and changes to pension rules.
The pensions lifetime allowance will be abolished with effect from 6 April 2023, and this is the amount you can accumulate into a pension in your lifetime. The current limit is £1,073,100 savings in excess of this can trigger an excess tax charge of up to 55%.
The annual allowance i.e. the amount you can pay into a pension tax-free also rises from £40k per year to £60k per year from 5th April 2023. This is still tapered from the new relevant earnings threshold of £260,000. Those who earn over this level will have a lower annual allowance based on their relevant earnings.
However, the planned corporation tax rise from 19% to 25% for businesses earning between £50k and £250k in profits still takes effect, which can prove to be a burden for businesses, especially those running multiple businesses.
The 130% super deduction tax for investments in plant and machinery will stop at the end of March and is being replaced with full in the year of purchase. 12 investment zones will attract tax reliefs and grant funding, and small companies that spend over 40% of their costs on R&D will receive £27 from HMRC for every £100 of R&D investment.
Other business measures
The budget has also announced several measures to help businesses, including:
1. the extension of the 5p reduction in fuel duty for another year,
2. the extension of the energy price cap freeze at £2500 for consumers for another three months,
3. the maintenance of the Energy Bills Discount Scheme until 31st March 2024 for all eligible businesses.
What do you need to do now?
Small business owners should put together a business plan for 2023 and model the impact of rising costs. They should consider whether they need to increase their prices, reduce overheads, or increase their wages, and carefully look at their personal and business tax situation.
For example, would they be personally better off if they paid themselves more via PAYE or made more pension contributions? Would closing their limited company and trading as a sole trader make more sense?
Business owners should also determine which staff needs a pay rise to avoid falling foul of the rise in the National Minimum Wage.
As always, were are here to help so please contact us if you need support navigating these changes.