As a business owner, it’s important that you stay up to date with any regulatory changes that could affect your operations.
On 15 March, Jeremy Hunt presented his spring Budget, in which he delivered a number of key reforms to fiscal policy.
Now that the dust has settled, here are five key announcements from the 2023 spring Budget that could affect your business.
1. Confirmation of the Corporation Tax rise
In the spring Budget, the chancellor confirmed that the Corporation Tax rate will rise from 19% to 25% from 6 April 2023. However, the 19% rate should still apply if your annual profits are equal to or less than £50,000. The measure is expected to raise £18 billion for the government.
When your taxable profits fall between £50,000 and £250,000, you will typically pay tax at a tiered rate.
As the tax rises, it may be worth looking into ways to mitigate the amount of Corporation Tax you pay.
For example, it may be worth making higher pension contributions from your business’ pre-tax income. Your employer contributions are typically classed as “allowable expenses”, meaning your business will receive tax relief, which could save you up to 25% in Corporation Tax.
Another great way to potentially mitigate Corporation Tax is by offering relevant life cover to your employees. This is a type of life insurance that pays a lump sum to an employee’s family if they die while being employed by the company.
Aside from the risks of your team not having adequate life protection in place, it can also be tax-efficient for your business. This is because the cost of a relevant life plan is typically an allowable business expense, which means you can benefit from Corporation Tax relief on the premiums.
Better yet, this can also be tax-efficient for the employee, as the lump sum is usually paid without attracting Inheritance Tax, and it doesn’t form part of their pension Annual or Lifetime Allowances.
2. Full expensing
Mr Hunt announced in the Budget that businesses would now have the ability to deduct investments in plant and machinery. This method of “full expensing” will allow you to deduct 100% of the cost of qualifying plant and machinery for tax purposes immediately, rather than over the period of use.
The list of qualifying equipment is relatively expansive, too, including:
- Warehousing equipment, such as forklifts or pallet trucks
- Machinery, including computers and printers
- Tools, such as ladders and drills
- Office equipment, like desks and chairs
- Commercial vehicles, such as excavators and compactors.
It’s worth noting that full expensing is proposed to last from April 2023 until the end of March 2026.
It has also been confirmed that the temporary increase to the Annual Investment Allowance to £1 million a year will be made permanent. This means that, so long as the available Annual Investment Allowance is sufficient, and the spending is a qualifying expenditure, your business could deduct the cost of an item up to the value of £1 million when calculating taxable profits.
The government says that these reforms mean that 99% of businesses receive 100% tax relief on their qualifying plant and machinery investments in the year of investment.
3. Proposed abolition of the Lifetime Allowance
Another change announced in the Budget that could affect your business is the proposed abolition of the Lifetime Allowance (LTA).
This is the total amount of money you can accrue in a pension pot tax-efficiently over the course of your life which, in 2022/23, stood at £1,073,100.
Technically, the LTA isn’t being completely abolished – there will be no tax charge for breaching it in the 2023/24 tax year. The chancellor pledged to abolish the LTA in a future Finance Bill.
Even though it’s been stated that the LTA will be abolished sometime in the future, it’s worth keeping in mind that Labour has said they will reverse this change should they assume power in the next election.
The aim of this move is to keep more older people in work for longer, potentially helping people save more in their pensions. As a business owner, this increased workforce participation could benefit your business in the long run. It also means you can accrue a higher pension pot across your lifetime without paying additional tax charges.
Also, the Annual Allowance – the yearly limit on tax-relieved contributions to your pension – will rise from £40,000 to £60,000 (or 100% of your earnings, if lower). You’ll still be able to carry forward your unused Annual Allowance from the previous three tax years where applicable.
This will also help you to build up more tax-efficient pension contributions, boosting the size of your fund and helping you to save more for your retirement.
4. Investment zones
Another fantastic announcement in the 2023 Budget was the aim of creating 12 new “investment zones” designed to drive business investment around the country.
These investment zones will be centred around universities and research institutes to increase investment and growth in green industries, digital technology, life sciences, creative industries and advanced manufacturing.
Some of the potential investment zone locations include:
- The West Midlands
- Greater Manchester
- South Yorkshire
- West Yorkshire
- The East Midlands.
Grant funding will be available to businesses in these zones, so it may be worth checking whether your business is located in any of the proposed investment zones. If your business will be situated in one of the zones, you could take advantage of a number of different benefits, such as:
- Full business rate relief
- Accelerated enhanced structures and buildings allowance
- Secondary Class 1 NIC relief for eligible employees
- Full Stamp Duty Land Tax relief for commercial land and buildings.
5. The Energy Bills Discount Scheme
If you’re struggling with high business energy bills, the new Energy Bills Discount Scheme could be of great benefit to you.
The scheme will run for 12 months from 1 April 2023 to 31 March 2024, and will replace the existing Energy Bill Relief Scheme (EBRS) that supported businesses from 1 October 2022 to 31 March 2023.
The scheme is made up of three parts:
- The standard discount will support eligible non-domestic customers in the UK, and will be applied automatically.
- The Energy and Trade Intensive Industries discount (ETII) will offer higher levels of support to businesses in eligible sectors, though you will need to register for this support.
- The Heat Network discount will offer higher levels of support to heat networks with domestic end consumers. Again, you need to register for this support.
The scheme will be available to all those on a non-domestic energy contract with a licensed energy supplier. This includes businesses, voluntary sector organisations such as charities, and public sector organisations such as schools and hospitals.
If your business is eligible, you will receive a per-unit discount on your energy bills during the 12-month period from April 2023 to March 2024.
According to the government, most businesses will save roughly £6.97 per megawatt-hour (MWh) on gas, and £19.61 per MWh on electricity.
Get in touch
The above changes are only a few that were detailed in the recent spring Budget. To find out more about how you and your business could be affected, please email email@example.com or call 01204 300010 to find out more.
A pension is a long-term investment. The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Your pension income could also be affected by the interest rates at the time you take your benefits.
The Financial Conduct Authority does not regulate tax planning.