The Spring 2023 budget announcement was a “budget for growth”.  Whilst there was a lot of talk around investing in industry and people, I didn’t feel that there was much direct change for SME owner-managed businesses, but that’s not to say the measures won’t have a positive future impact.

Most notably, it was announced that some working parents will receive additional childcare and that the “30 free hours per week” will be offered to children from 9 months old rather than 3 & 4 years old.  This will make it easier for staff to return to work earlier without the worry of high childcare costs.

There are no planned changes to either personal or business tax rates (any changes implemented in the November 2022 mini budget will still go ahead such as the Corporation Tax increase from 19% to 25%).

Personal Tax

Whilst there was little to no mention of tax in today’s budget, that doesn’t mean it’s not worth discussing.  Due to the freeze on income tax thresholds, more people will pay more tax due to increasing costs and pay rises (known as fiscal drag).

As a result, most people are likely to be worse off due to November 2022’s mini budget and the fact that there has been no change in the Spring budget.

Pensions

The annual contribution cap has been increased, meaning that you can pay £60k a year into a pension rather than £40k.  This could be useful as part of a remuneration strategy, especially due to increased tax costs elsewhere.

The total lifetime allowance cap of £1m has been abolished.

There has been an increase to the pension money purchase allowance from £4k to £10k.  Previously if you had taken any money from your pension, you could only contribute £4k in.  The new rules will increase this limit to £10k.   

The Chancellor says this is to encourage those (over 50) who are thinking about not working to continue working, or to return to work.

Corporation Tax

Companies investing in qualifying plant and machinery assets can now write off 100% of the cost against their tax liabilities.  The government is calling this “Full Expensing” and whilst this is good news for large companies, the rules seem to offer no higher level of tax breaks to supersede the 130% Super-deduction that it replaces. 

The rules mirror the Annual Investment Allowance which has been in place for some time and allows companies to write off asset investments up to £1m per year….so think of the new Full Expensing rules as simply removing the spending cap for Annual Investment Allowance.

The gov.uk website gives an example of £10m of investment being written off in year 1, so again it’s larger companies who are heavily investing that will benefit here.

Energy

There is further support with energy bills and the government has continued the energy price guarantee of £2,500 for a further 3 months, the cap was due to rise by 20% in April.  However, the winter bill support of £66pm will end as planned.

Other duties and considerations

Good news for motorists, the chancellor will extend the reduction to fuel duty for a further 12 months.

There will be a tax cut on draught beer sold in pubs from 1st August in a bid to save “The Great British Pub” but no mention of help with the impact of rising costs, the increase to Corporation Tax and the cut in the business energy bill support.

Upcoming changes already announced

  • The new tax year from April 2023 sees the dividend tax free allowance cut from £2,000 to £1,000 (and then to just £500 in 2024/25).
  • Dividend tax rates will remain at 8.75% for the basic rate band, 33.75% for the higher rate band and 39.35% for the additional rate band. 
  • The additional rate tax band is also lowered from £150,000 previously to £125,140. This will cause those earning above the threshold to pay more tax on the top slice of their income.
  • Income tax rates remain unchanged at 20%, 40% and 45%.
  • Capital Gains Tax – the annual exemption will be reduced from £12,300 this year to £6,000 from April onwards, and £3,000 in 2024/25.
  • Corporation Tax will increase to 25% for companies with profits over £250k.  Profits under £50k will pay 19% and profits between £50k and £250k will pay a marginal rate.

It’s evident that the government is trying to squeeze more tax out of the masses without raising personal tax rates, which makes planning even more important. 

Now about that draught beer tax, looks like I’m going to have to do my bit to help – see you at the pub!