Chancellor Jeremy Hunt delivered his Budget today at 12:30 pm. Here we look at some of the main points.
What are the main points for small business owners?
A big rise in the rate of Corporation Tax – confirmed
If you run a limited company, you will already be bracing yourself for a significant rise in Corporation Tax from next month. If your profits are £50,000 or more, you will pay more tax. You can read our background guide here.
Full expensing to write off all qualifying investments against Corporation Tax
A new system of full expensing has been announced, worth £9bn per year. It will run from 1st April until 31st March 2026.
This means all UK businesses will be able to write off the full cost of qualifying main rate plant and machinery assets in the year of investment. In other words, businesses can now deduct the full cost of qualifying investment in assets right away, rather than gradually over the lifetime of the asset.
The 50% first-year allowance (FYA) extended
This incentive lets businesses deduct half the costs of other plant and machinery assets during the year of purchase, including long-life assets such as insulation. After the first year, 6% of the remaining costs can be written off via Writing Down Allowances (WDAs).
The FYA will be extended by another 3 years until 31st March 2026.
Big changes to pensions tax relief allowances
The Chancellor has abolished the Pension Lifetime Allowance altogether. It had previously been £1.073m. This is the amount you can save in a pension before paying tax on additional contributions.
The Annual Pension Allowance has also been increased from £40,000 to £60,000.
The Money Purchase Annual Allowance will rise from £4,000 to £10,000 per year.
You can read more in our new feature on these pension reforms.
Research & Development tax support
The Chancellor also announced further support primarily aimed at loss-making R&D intensive SMEs – those that spend 40% or more of their expenditure on R&D costs.
Eligible companies will be able to reclaim £27 from HMRC for every £100 of R&D investment.
Energy Price Guarantee extended for a further 3 months
The Energy Price Guarantee has been extended until the end of June. This means that the energy costs for the average family will remain at £2,500 per year. From July, the price of energy is expected to fall significantly.
Other interesting points include:
- Inflation is expected to fall to just 2.9% by the end of 2023.
- The UK is expected to avoid a technical recession during 2023.
- Unemployment is expected to rise ‘modestly’ to reach 4.4%.
- The Chancellor announced several incentives to encourage people back into work.
- All under-5s will benefit from 30 hours of free childcare from the moment maternity care ends, where eligible. So by September 2025, working parents of under-5s will be entitled to 30 weeks of free childcare per week.
- Fuel duty has been frozen for another 12 months.
All of the Budget documents have been published on the .GOV website here.
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