Every year, the country receives a speech from the chancellor to inform us about the current financial climate and what the government plans to do to improve it. Most of the time, budget statements discuss how any changes will impact small businesses.
Unfortunately, this year, there hasn’t been too much in terms of exciting announcements for small business owners. So while a lot of us were probably looking forward to seeing what is in store for us, there really isn’t anything significant in the works at the moment, which left us feeling a little bit disappointed.
However, we have put together the key points of what the chancellor did talk about, so you can get an idea of what we can expect in the next few months.
Pension Contributions Cap Raised
Whether you’re a small business owner or not, this is good news for anyone with a pension plan. That’s because the government has raised the annual pension contributions cap. It used to be £40,000 a year, but you can now contribute up to £60,000 a year. Similarly, it was also announced that there is no more lifetime cap on pensions, which used to be £1.07 million.
Annual Investment Allowance
The Annual Investment Allowance (AIA) is currently available for sole traders and companies. It is activated once one of these groups purchases things that fall under the category of ‘capital’ items, such as IT equipment and machinery. You can then dedicate the cost of all of these items from your profits for the year, with no limit.
Beforehand, there was a cap of £1 million on the Annual Investment Allowance, but it was so high that few businesses reached it. Therefore, this change isn’t very different, and it is only running for three years.
There have been quite a few changes to tax credits for various industries, such as entertainment and research and development. However, there is too much to list about these changes, but it is good to keep in mind that there are now some tax credit relief and extensions which can help you if you work in one of these industries.
New Investment Zones
The chancellor also mentioned creating 12 new investment zones across the country which will provide more tax relief like the industries we mentioned above. So far, there isn’t too much information on the plans for these investment zones, but we recommend keeping an eye out to see what developments happen.
Many people who work in small businesses have children, and it can be difficult to find adequate childcare to look after them while you are at work. Luckily, there was a key announcement in the spring budget that said they aim to make 30 hours of funded childcare available for children from the age of nine months old to five years old.
This is fantastic news for new parents who are coming back from maternity/paternity leave, but it is also good for parents who haven’t been working because they can’t find childcare.
Over 50’s Returnership
Alongside childcare, the government is also looking at putting extra measures in place to help people in work, particularly those over 50. Basically, they are offering an over-50 ‘returnership’ which helps enhance the skill set of people in this age group through the use of things like apprenticeships.
This is great news for people who have struggled to get back into work after the pandemic or who took early retirement and are looking at getting back into work. They still need to release more details, but we are very excited about this development.
Increase In Corporation Tax
While everything we’ve mentioned in the list so far has been positive additions to the spring budget, not everything is good. One of the negative things coming in the rest of 2023 is an increase in corporation tax. From April this year, they are hiking up the corporation tax from 19% to 25%, which will depend on how much you earn. This is a large increase, and we don’t know what this means for some small businesses.
It is important to keep in mine that corporation tax will increase on a sliding scale dependant on profits.
No More Super Deduction
Another negative in the spring budget is that they are getting rid of the Super Deduction scheme. Before, it allowed limited companies to invest in capital items and also gain additional tax relief. However, from the 1st of April 2023, they have decided not to extend this scheme, which will be bad news for a lot of businesses. There is still the Annual Investment Allowance, but it is nowhere near as generous.
Less Dividend Allowance
While it isn’t being axed like the Super Deduction, the chancellor did announce that the current dividend allowance will be cut in half. This isn’t great if you currently pay or reward yourself through dividends because it is a dramatic reduction. In April 2023, you will be able to receive £1,000 in dividend allowance, but it is going to be halved again next year to £500.
Reduced Tax Free Capital Gains
The last negative mention in our summary of the spring budget is that there has also been a reduction in the capital gains annual exemption. It is going down to £6,000 a year in April 2023, and like Dividend Allowance, it is being halved next year, which will leave the exemption to only £3,000.
As you can see from our summary, there isn’t anything major that will improve the lives of small business owners and other companies. However, we can’t take what positives they have provided us for granted. There are a few negatives which many businesses aren’t going to be too happy with, but having all the right information and facts can help us get prepared for these changes. Keep an eye out for any further announcements for extra details about the spring budget.