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Let's talk Budget-2023

Updated: Dec 25, 2023

Since the UK has two chancellors come and go, this is the first budget in 18 months and has been the most anticipated one in these times of inflation. Chancellor Hunt’s budget highlights various important factors such as Energy bills, Carbon Capture, Business Taxes, Childcare, et.,

Jeremy Hunt also told the MPs in his Spring Budget that the UK economy would avoid recession in 2023 as inflation plunges from recent highs.

The following measures stood important for Businesses:

  • Simplified tax systems for Small Businesses

  • Changes in capital allowances to boost investment

  • Increased support for R & D

  • The Energy Price guarantee

  • The Investment zone Programme

men with suitcase

Now let's look deeper into each aspect:

Simpler Tax System for Small Businesses The simpler tax system helps free Up time and money for the small businesses. It has been planned to create a pro-business, pro-enterprise tax regime. However, the planned increase of corporation tax from 19% to 25% in April has been announced. The simplification package would consist of the following:

  • The Enterprise Management Incentives (EMI) scheme will undergo changes beginning in April 2023 to streamline the process to grant options and reduce the administrative load on participating companies. This would include removing the necessity to sign a working time statement from April 6, 2023, and specifying the share restrictions in option agreements.

  • IT Systems will enable tax agents to payroll benefits in kind on behalf of their clients, improving client assistance and easing employer burdens.

  • Measures to streamline the customs import and export processes, including improvements to the Simplified customs declaration process and the Modernizing Authorization project.

HMRC has taken a commitment to deliver a systematic review of guidance and forms for small businesses, in the process a consultation to make it easier for SMEs to calculate their income taxes has been taken into consideration. This is identified as the first phase of simplifying the work on tax. The officials are going to continue to engage businesses directly and prioritize this as part of all tax policymaking. Major Capital Allowances The United Kingdom maintains the lowest corporation tax rate in the G7 even after the April rate rise.

  • Super Deduction is coming to an end on 31 March 2023, the chancellor has announced a policy package at Budget which would go further and ensure the UK capital allowance regime.

  • Capital allowances help businesses write off the cost of a few assets spending against taxable profits which result in overall tax bill.

  • The two major capital allowances of Spring 2023 Budget together worth £27 billion over the next three years and an effective £9 billion a year corporation tax cut for the businesses in UK.

Research and Development

  • The chancellor announced a new R&D program for 20,000 SMEs in the UK in the spring budget 2023. Th program will begin on April1, 2023 and be worth around £500 million per year.

  • The chancellor's plan is to boost the economy and make the UK the finest place in the world to launch and expand a business by promoting the conditions for enterprise to succeed.

  • This program primarily targets SMEs at loss making R&D intensive SMEs. While having major focus towards the most Impacted by the rate changes introduced at autumn statement 2022.

  • If a firm spends at least 40% of their overall budget on qualifying R&D, such a company is said to be R&D intensive.

  • At around 1,000 claiming companies would belong to the pharmaceutical and life sciences industries. This will aid in the creation of lifesaving medications.

  • At around 4,000 Digital SMEs would belong from the computer programming, consultancy and other related sectors. This will aid in the development of AI, machine learning and other digital based technologies.

  • At around 3,000 firms would belong from other manufacturing units and the other 3,000 would be professional, scientific and technical activities firms would qualify for this enhanced support.

The Energy Price Guarantee

Another major announcement in the spring 2023 budget was that the government plans to extend its “energy price guarantee” for bills for another three months. This guarantee has been designed to protect households from increases in energy costs by limiting the amount suppliers would charge for each unit of gas and electricity. This energy price guarantee will be kept at £2,500 a year for typical households from April until June. This energy guarantee is also estimated to help save £160 on energy bills for an average household.

The Investment Zone Programme

With the goals of growing priority sectors and addressing economic disparities, the government expects to establish 12 Investment Zones across the UK. The potential locations in England have already been identified which are the Mayoral Combined Authorities of East Midlands, Greater Manchester, Liverpool City Region, The Northeast, South Yorkshire, Tees Valley, West Midlands and West Yorkshire, etc., For eight zones in England, each investment zone is expected to benefit from the government interventions (including tax reliefs and grant funding) worth up to £80 million over a five year period. Legislation to give access to tax reliefs equivalent to those for Freeports will be included in Finance Bill 2023 and the Government anticipates funding will commence in 2024/25. We Can Help!

The budget has brought several changes and updates forward for business, it is only wise to make the most of the updates and file your taxes with the help of a professional. Your firm will benefit from a coordinated, cross-disciplined service from our specialist accountant team.

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