The Chancellor, Jeremy Hunt, gave his Spring Budget on the 16th March 2023. Whilst there were headline changes in Free Childcare, Pension Allowances and Energy Bill support for households and individuals there were a number of changes that will affect small businesses in particular and we have summarised these below:
Although rumoured that there could be potential changes to the reforms announced previously due to come into place as of the 1st April 2023, this wasn’t the case and so the planned reforms will go ahead as follows:
- Current 19% rate to remain as a ‘Small profits rate’ and applied to taxable profit below £50,000.00
- For companies between £50,001 and £250,000 will pay at a rate of 25% with a Marginal Relief deduction this will provide a level of relief from the 25% rate dependent on where your profit falls for example if you were to generate £75,000 between 01st April 2023 and 31st March 2024 then your corporation tax would be £18,750, you would receive £2,625.00 in Marginal Relief and so only pay £16,125 an effective rate of 21.50%.
- Companies with taxable profits of £250,001 and more will pay Corporation Tax at a rate of 25%
To somewhat compensate for the rise in Corporation Tax and following the success of the ‘Super-Deduction’, that ends on the 31st March, Full Expensing will be introduced as of the 1st March 2023 for an initial 3 year period. What this allows for qualifying companies, investing in qualifying equipment is that they can use 100% of the money invested to reduce the amount of taxable profits straight away. If assets do not qualify for this relief, so long life assets which have a useful economic life of 25 years or more, then a 50% first year allowance can be applied in this period also which is of benefit.
The Annual Investment Allowance will be permanently set at £1,000,000 from the 1st April 2023, which will likely cover the cost of purchasing assets for the majority of small businesses.
Research & Development (R&D) Relief
From 1st April 2023, loss-making small or medium-sized enterprises (SMEs) will be able to claim a credit worth £27 for every £100 they spend on R&D, provided that R&D constitutes at least 40% of their total expenditure.
There was a planned rise in Fuel duty of 11p but this has now been cancelled, this will maintain last years 5p cut for another 12 months.
This measure was announced previously but has now been confirmed as taking effect from April 2023 and replaces the Energy Bill Relief Scheme. More details around this scheme can be found here.
The full Spring Budget is available for review online via HM Treasury – https://www.gov.uk/government/publications/spring-budget-2023/spring-budget-2023-html and should you have any queries around these changes then please do not hesitate to contact us.
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