Jeremy Hunt, the Chancellor of the Exchequer, delivered his Spring Budget today, the 15th of March 2023, calling it the “Budget for long term, sustainable and healthy growth”.

It was announced that the UK will not enter recession this year, with inflation going from 10.7% in November 2022 to 2.9% by the end of 2023.

How the Spring Budget 2023 could affect you as a Director of a Limited Company or Small Business Owner:

Pensions

As a Director and Contractor of a Limited Company from 2014/15 you were able to pay up to the annual pensions allowance of £40,000 into a pension. This has increased by 50%, meaning that from April 2023 the allowance will be £60,000 per tax year. Paying into a pension from your Limited Company reduces your corporation tax liability, this increase to £60,000 will give contractors the opportunity to make further tax savings.

The lifetime allowance, originally set to £1,073,100 in the tax year 2022/23 has been abolished. This will help to ensure that high skilled professionals such as NHS Doctors are not retiring early due to pension charges.

Corporation Tax

The increase to corporation tax rates for businesses with profits in excess of £250,000, originally announced in October 2022 will take effect as planned from April 2023.

Despite the increase to 25%, the UK will still have the lowest rate of Corporation Tax in the G7.

For businesses with profits under £50,000, the corporation tax rate will remain at 19%. Profits between the small profit rate (£50,000) and main rate (£250,000) will be calculated at a gradual increase, claiming marginal relief.

If you forecast your profits to be in excess of £50,000 from April 2023, you will need to speak to your accountant about how this effects your corporation tax liability provisions.

Rates and Allowances

No announcements were made regarding the rates and allowances for 2023/2024 in the Spring Budget that differed from the October 2022 budget. The dividend tax free allowance will be reduced £1,000 from April 2023 and capital gains tax free threshold to be reduced to £6,000.

The government has already increased the National Insurance contributions (NICs) Primary Threshold and Lower Profits Limit (from July 2022 onwards), to align the point at which employees start to pay NICs with income tax, at £12,570 and these are not changing following today’s statement.

With the new tax year approaching, contractors, limited company directors and small business owners are encouraged to seek tax advice from their accountant with regards to salary, pension, and dividends for the coming tax year.

Capital Allowances and Reliefs

Rumours of the Annual Investment Allowances being slashed from April 2023 were quashed today, with the allowance being set to £1m permanently, this provides 100% first-year relief for qualifying plant and machinery.

To continue encouraging innovation and prosperity in the Technology and Science sector, the government announced that from the 1st April 2023 the Research and Development credit will increase from 13% to 20%.

Additional support will be available to loss making SME’s, eligible small businesses will receive £27 from HMRC for every £100 of R&D investment.

Energy Bills

It has been confirmed that the Energy Price Guarantee (EPG) cap at £2,500 will be maintained for an additional 3 months from April 2023, saving the average family £160. Those on pre-paid meters are paying more than those on direct debit, the Chancellor commented that this will be brought in line and comparable to the direct debit charges.

To ensure that we are prepared for any future energy price shocks, the Government is supporting investment in the energy system by launching Great British Nuclear and support new nuclear builds to work towards net zero goals.

Childcare Support

The cost of childcare is preventing parents getting back to work, with many planned career breaks turning into career finished. It is reported that there are 435,000 people in England with children under the age of 3 who are unable to return to work due to the cost of childcare.

The Chancellor announced that to support working parents and bridge the unemployment gap between parental leave ending and children qualifying for free childcare, from April 2024, working parents of 2-year-olds will be able to benefit from 15 hours free childcare per week. From September 2024 15-hours-free childcare will be available for children from the age of 9 months old, or when maternity/paternity leave finishes up to school age. As of September 2025, the Government will then role out the final phase by extending the free hours to 30-free-hours per week for all eligible under 5 years olds.

Alcohol Duty

Jeremy Hunt confirmed that the beer and draught products in pubs will be 11p cheaper than in supermarkets, calling the relief the “Brexit Pubs Guarantee”. The draught relief will increase from 5% to 9.2% for beer and cider and from 20% to 23% for wine and spirits.

If you have any questions off the back of the Spring Budget and how this might affect you or your business, please contact one of our expert accountants on 01296 468 185.