6 important ways the spring Budget could affect you and your business
In his recent spring Budget, chancellor Jeremy Hunt announced many changes that could be significant for you if you run your own business. While some of the changes have already come into effect for the 2023/24 tax year, some may take a little bit longer.
Read on to learn about six of the announcements that could affect you and your business.
1. Energy support package is going ahead as planned
While households will receive an extension of the energy price guarantee, the chancellor made no changes to the Energy Bills Discount Scheme (EBDS) that began on 1 April 2023.
The EBDS was introduced to replace the Energy Bill Relief Scheme (EBRS), which finished on 31 March 2023. Whereas the EBRS capped the amount a business would pay for each unit of energy they used, the EBDS instead provides a discount to wholesale energy prices.
The scheme is available to:
- Businesses
- Voluntary sector organisations, such as charities
- Public sector organisations such as schools, hospitals and care homes
who are:
- On a fixed-price contract that was agreed on or after 1 December 2021
- Currently signing new fixed-price contracts
- On deemed or out of contract or variable tariffs
- On flexible purchase (or similar) contracts
- On variable “Day Ahead Index” tariffs (Northern Ireland scheme only).
For most eligible organisations, the discount offered by the EBDS is:
- Electricity: £19.61 for each megawatt hour (MWh)
- Gas: £6.97 for each MWh.
The new scheme will run until 31 March 2024. You can learn more about the energy bill support scheme on our website.
2. Additional support for childcare costs
The top priority in the spring Budget was to get people back to work. To do this, the government wants to help more parents return to the workforce after they have started a family, since the cost of childcare is one of the biggest barriers to working for new parents.
To tackle this problem, the chancellor has announced an expansion of the existing free childcare hours. The government plans to offer 30 hours of free childcare a week for 38 weeks of the year to parents of children aged between nine months and two years. At the moment, only children aged three and four are eligible to receive free childcare hours.
The new measures will be rolled out in phases, starting in April 2024. Since the support will be phased in, it may not have an immediate impact on helping parents to go back to work. However, the government expects that by September 2025, all eligible working parents will be in receipt of the expanded support.
As a business owner, the new support measures for parents could have a positive impact on recruitment for your firm and may also help to improve staff retention following parental leave.
3. New investment zones across the UK
Stimulating growth in the economy was another aim of the spring Budget, and to this end, the chancellor announced the launch of the refocused investment zones scheme. Up to 12 zones will receive funding across the UK as part of the government’s “levelling up” programme, including four zones across Scotland, Wales, and Northern Ireland.
So far, eight local authorities will be eligible to host an investment zone in England:
- West Midlands
- Greater Manchester
- The north-east
- South Yorkshire
- West Yorkshire
- East Midlands
- Teesside
- Liverpool
Each zone will have access to interventions worth £80 million over five years, including tax reliefs and grant funding. The government hopes that this will provide greater powers to more local leaders who will have flexibility in how the funding can be used.
Some of the tax reliefs that could benefit businesses based in the investment zones include:
- Stamp Duty Land Tax relief
- 100% business rates relief
- Enhanced capital allowances
- Enhanced structures and buildings allowance
- Lower employer National Insurance contributions.
4. Pensions tax changes
On a more personal level, the changes announced to pensions and taxes could prove to be very significant for business owners. Here are some of the changes that were announced and how they could affect you.
Annual Allowance increased from £40,000 to £60,000
The Annual Allowance (AA) is the maximum amount that you can contribute to your pension(s) each tax year and still receive tax relief on your contributions. Previously, this was limited to £40,000, but for the tax year 2023/24 the allowance is £60,000.
This is especially helpful for business owners because saving into a pension is a very tax-efficient way to save for your future. As well as receiving tax relief on the contributions at your marginal rate (effectively meaning you don’t pay Income Tax on the salary that you use for the contributions), you can also usually claim Corporation Tax relief on the employer contributions to your pension.
The Lifetime Allowance tax charge has been removed, with a plan to abolish it in the future
In previous tax years, the Lifetime Allowance (LTA) has meant that, once your pension fund exceeded a certain threshold, you would have to pay a tax charge when you withdrew your money above this threshold. In the 2022/23 tax year, the limit was £1,073,100.
In the spring Budget, the chancellor announced that the tax charge for exceeding the LTA would be removed in 2023/24, with a plan to abolish it in the future. This means that, subject to annual limits, you can save an unlimited amount of money into your pension(s) tax-efficiently across your lifetime.
For business owners, this is another change that could be very beneficial for your financial plan. Without the worry about a tax charge, you can put more of your hard-earned profits into your pension pot.
Since pensions are usually considered outside of your estate for Inheritance Tax (IHT) purposes, this could also prove to be a very useful way of reducing your estate’s IHT liability and passing on more of your wealth to your loved ones after you pass away.
It’s important to note that there hasn’t been any firm date confirmed for the legislation to abolish the LTA tax charge, and Labour has already stated they would reverse this change if they come into power. So, it’s important that you stay up to date with any changes to this over the coming years.
5. The Corporation Tax increase is going ahead
Perhaps the most direct impact on your business from the spring Budget will be the confirmation that the planned increase to the Corporation Tax rate is going ahead for the tax year 2023/24. While this has been a flat rate of 19% for the past few years, from 1 April 2023 Corporation Tax will be split into bands as follows:
- Companies that have profits of £250,000 or more will be charged Corporation Tax at the main rate of 25% of all profits.
- Companies that have profits of £50,000 or below will be charged a “small profits rate” of 19% on all of their profits.
- Companies whose profits fall somewhere in between these two thresholds will be charged the main rate of 25%, but will receive marginal relief so that they pay a discounted rate.
So, if your profits are below £50,000, you are unlikely to be affected by the change to the rate. However, if your profits exceed this, it’s important to make note of the rate that you could be charged and plan accordingly to avoid a nasty surprise when you receive your tax bill.
6. Business Investment Allowance increased
An increase to capital allowances means that, from 1 April 2023, businesses investing in new IT equipment, plant, or machinery can offset 100% of the investments against profits for tax purposes immediately, rather than over the period of use.
Additionally, companies investing in special-rate (including long-life) assets can offset 50% of the investments against profits. The policy is initially introduced for three years, ending on 31 March 2026.
The intention behind this policy is to limit the impact of the increase of Corporation Tax, so check to see if your firm is eligible so that you can reduce your overall tax liability.
Get in touch
While the announcements from the spring Budget might change the way you run your business or how you use your profits, one of the things that won’t change is the importance of having the right protection in place.
From buildings and contents insurance to employers’ liability insurance, we can help you to build a bespoke protection package to give you peace of mind and support your business through thick and thin.
Email creative@eggarforrester.com or use our contact form to request a callback from our team.
