The Spring Statement (Budget) 2023 Summary

Kirsty Young Advice and Tips, News

Yes, it’s that time of year again. Another speech from the chancellor updating us on the country’s current finances and its plans.

In the past few years, the various Budget Statements have included a wave of announcements impacting on small business owners, both positively and negatively.

However, aside from the ‘dad jokes’ and mention of potholes, this year there was a real lack of announcements to interest let alone excite the small business owner. We were poised and waiting for some substantial support announcements – and were left feeling a little flat.

There were also a distinct lack of reversals on forthcoming, previously announced measures that will significantly affect all business owners.

Here’s our summary of the key points.

 

Pension Tax Relief

If you are looking to invest a significant amount in your pension, there was some good news . The annual cap on pension contributions was raised to £60,000 per year (from £40,000).

In a surprising announcement, the chancellor also announced that the ‘lifetime cap’ (aka lifetime pension allowance, or LTA) on pensions is to be completely removed. It had been set at £1.07million.

 

‘Full Expensing’

Whilst at the time of writing (directly after the announcements) we have not seen any small print, it appears this announcement will work in effect similar to the existing ‘Annual Investment Allowance’ (AIA) style of relief.

The current AIA is available to sole traders and companies. It comes into play when you buy ‘capital’ items, such as computers, IT equipment, plant and machinery. The current Annual Investment Allowance allows you to deduct the full cost of the item (for tax purposes) from your profits in the year you buy it.

For many small businesses, this won’t feel any different, as they never spent enough in a single year to exceed the £1million cap on the available AIA anyway. This new relief is scheduled to run for 3 years from 1st April 2023, and we suspect this will only be super-relevant for larger businesses.

 

Audio Visual, TV, Film and Video Games Tax Credit Changes

This change is pretty specific so we won’t cover all the changes here (probably a future blog!). Basically, there have been some extensions and tweaks to continue to provide relief to these industries through tax credits.

 

Research and Development Tax Credits

As above, this change for companies investing in R&D is fairly specialist. In brief, there have been some tweaks to continue to provide relief to companies carrying out R&D through tax credits.

 

12 new ‘investment zones’

There was mention of new investments zones across the UK that will benefit from additional tax reliefs. These plans appear to be light on actual detail at the time of writing, but are something we will keep an eye on as they develop.

 

Childcare funding

Whilst not a tax point, we feel this is very much worth covering in this blog as it should really help the number of people available to work. The key announcement was that 30 hours of funded childcare will (eventually) become possible from the age of 9-month-old, for children under 5.

This should be very good news for parents looking to return to work and who are currently “economically inactive”. It’s also great news for employers in a tight labour market.

 

‘Returnerships’

While on the subject of measures that help the available workforce, there was an announcement of a new over 50’s ‘Returnership’. These are focusing on boosting skills and apprenticeships in the over 50s age group, who may not have returned to the workforce after the pandemic, and/or took early retirement. This will be an interesting one to follow as the detail comes out.

 

The Bad stuff that’s still happening

It’s important to look beyond the headlines to what is still coming down the line in 2023.

– Corporation tax increasing

From April 2023, corporation tax is still going up from 19% to up to 25%, depending on your level of profits. That’s a major hike.

– Super Deduction is being axed

Currently limited companies are able to invest in capital items and gain extra tax relief under the “Super Deduction” scheme. This stops on 31/03/23 and it’s not being extended or replaced. The closest replacement will be the ‘Full Expensing’ described above, but it is not as generous.

– The dividend allowance will be cut in half

If you pay or reward yourself via dividends, a reminder that the amount of tax-free dividends you can receive is being slashed. From April 2023 you can only receive £1000, and that drops again to £500 in April 2024.

– The Capital Gains Annual Exemption is cut

The amount of capital gains you can make tax free is being massively reduced from April, dropping to just £6000 per year, then £3000 a year from April 2024.

 

A small tidbit worth mentioning

Buried in the budget paper was a mention of a ‘discussion document’ that will discuss how to better modernise HMRC’s income tax services, aiming to:

  • Support better digital communication with taxpayers and reduce administrative burdens.
  • Seek views on how to make it such that taxpayers can quickly and easily manage their own tax affairs online, reducing the need to contact HMRC.

We look forward to reading this one!

 

In short…

Whilst there were no real exciting headlines announcements for small business owners, there were many other announcements that might be relevant to you personally, including energy caps, fuel duty etc.

You can check out the full details of the Spring Statement HERE.

 

I’m feeling overwhelmed by all this stuff

Ask your accountant – they should be happy to help. If you don’t have an accountant, or feel you aren’t making the most of tax breaks and other allowances with your current accountant, we’d love a chat about how we can help.