Budget Update
The Chancellor announced his March budget yesterday. Similar to the budgets and autumn statements of the last few years we knew most of the details in advance. Nevertheless here are our take-aways:
economic outlook
One piece of good news is that UK PLC is in a better position than feared. It is believed that inflation will fall to 2.9% by the end of 2023.
Back to work
This was the Chancellor’s main theme, acknowledging that finding staff is a problem faced by most small businesses. The measures he set out to address this are:
Providing more funded childcare. 30 hours a week of free childcare is being extended to working parents of 1 and 2-year-olds.
Abolishing the lifetime pension allowance
Increasing the amount people can pay into a pension tax free, i.e. from £40k per year to £60k per year.
Providing more money to schools to help with wrap-around care
Whilst these will help, the question is whether they are going to make a serious impact on people going back to work.
tax rates
What was hoped was that the chancellor was going to stop the planned corporation tax rise from 19% to 25% for businesses earning between £50k and £250k in profits. Sadly, this tax rise and all its complications still take effect. These will prove difficult if you run multiple businesses as the profits of all businesses will be combined.
The VAT threshold is frozen at £85k for two years. As prices increase, this will pull more small businesses into VAT registering.
Personal tax bands, dividend tax and NI thresholds remain as per the Autumn Budget, none of which is great news for small business owners.
What there was in the budget were the following announcements which will help businesses:
The 5p reduction in fuel duty is being extended for another year.
The energy price cap freeze at £2500 for consumers will be extended for another 3 months. I.e. until the end of June 2023
The Energy Bills Discount Scheme is being maintained until 31st March 2024 for all eligible businesses.
Small companies who spend over 40% of their costs on R&D will receive £27 from HMRC for every £100 of R&D investment.
Tax Credits have been extended for the Creative Industries.
super deduction replacement
A lot has been made of the replacement of the Super Deduction. The 130% super deduction tax for investments in plant and machinery which stops at the end of March. It is being replaced by a similar deduction at the 100% level.
However this will only benefit companies with capital expenditure over £1 million in the year as a 100% deduction up to that level already exists with the Annual Investment Allowance.
planning for 2023-24
Prices have increased across the economy and from April the minimum wage increases significantly. The questions now arise:
Do you need to implement a price increase?
Is there anyone on minimum wage that needs a pay rise?
Do you need to create a budget for the year?
Let us know if we can help.