How did the Spring Budget affect your business?
Although it may feel like a lifetime ago, some of the measures announced in the March Spring Budget 2023 are just starting to take effect. Now we’re one month into the new tax year, most of Chancellor Jeremy Hunt’s measures are already underway.
As some of these changes may directly impact your business, it’s good to remind yourself of the announcements and how they could affect you. Here’s what you need to know.
Spring budget – full expensing
With the super deduction having ended on 31 March, the Chancellor unveiled his new form of capital allowances – full expensing.
As of April, full expensing allows companies to claim back 100% of their expenditure on plant and machinery investments. Companies that do qualify will be able to write off the whole investment in one go, lowering their corporation tax bill. With full expensing, a company can reclaim 25p for every £1 spent on eligible investments.
This new capital allowance will continue until 31 March 2026, although Hunt added that, if possible, it may become permanent.
Although the rise in corporation tax was announced before the Spring Budget, it has now increased from 19% to 25% for companies with profits over £50,000. Smaller companies under the £50,000 threshold will still pay 19%, known as the small profits rate.
Eligible companies with profits between £50,000 and £250,000 can apply for marginal relief, reducing their corporation tax proportionately. You cannot claim marginal relief if:
● you’re a non-UK resident company
● you’re a close investment holding company
● your profits (including distributions from unrelated, unassociated companies) are over £250,000.
Research and development
Loss-making SMEs now have stronger support under the research and development (R&D) scheme. Although Hunt announced in November 2022 that SME R&D tax credits would drop from 14.5% to 10%, this is no longer the case.
Companies which spend more than 40% of their time on R&D-led activities can still claim a 14.5% tax credit if they make a loss. This equates to a claim
of £27 for every £100 spent.
Over the summer, further reforms are expected to be published to reform the existing audiovisual tax reliefs into expenditure credits. It will be modelled on the R&D expenditure credit system and offer a higher relief rate.
Pension lifetime allowance
In a bid to keep workers in employment for longer, the Chancellor announced the abolition of the pension lifetime allowance. Now workers can save as much as they wish during their working life without incurring tax. Previously, the allowance had a cap of £1,073,000. Hunt also increased the annual allowance from £40,000 to £60,000, so taxpayers can save an extra £20,000 a year without paying tax.
Hunt said this measure will “stop over 80% of NHS doctors from receiving a tax charge”. He added: “[The reform will] incentivise our most experienced and productive workers to stay in work for longer.”
Roll with the changes
The Spring Budget will have overarching effects on businesses over the coming months. Whether you’re applying for R&D credits or investing in plant and machinery, we can’t recommend highly enough to stay abreast of the shifts.
If you would like to discuss any area of the Spring Budget and how it might impact on your or your business’ affairs, please contact us on 020 3697 7147.