What does it mean for your business?

Chancellor Jeremy Hunt finished giving his Spring budget speech after an hour yesterday but experience tells us that it usually takes another 23 before we have a more holistic sense of what the budget actually entails both in the headlines and just as importantly, the small print. 

What announcements will affect your small and medium businesses the most? 

What do business owners and directors need to know about? 

What changes are coming in April at the end of the month?

Find out everything you need to know or might have missed right here as we go through all of the announcements and changes happening from April 1st. 

  1. Business Energy Bills 

As expected (and we wrote about last week) the Energy Bills Discount Scheme (EBDS) will replace the current Energy Bill Relief Scheme (EBRS) from April 1st. 

This will discount the unit rates on all eligible commercial gas and electricity contracts for the next year. 

You can find out more on the details by visiting our previous blog on the subject but the key points to remember is that this is not a price cap and that the funding level (£5.5 billion) is a reduction from the £18 billion that funded six months of EBRS.  

  1. National Insurance Contributions (NIC)

National Insurance thresholds will remain the same until 2028 as was announced in the 2022 Autumn Statement. 

Employees won’t pay NICs until they earn £12,570 a year. 

Employers will pay NICs at a rate of 13.80% for all employees that earn more than £8,840 a year excluding under 21’s and apprentices 25 or under. 

The Employment Allowance will remain at £5,000 until March 2026 – this means eligible employers can reduce their NIC bills by up to £5,000 a year.

Self employed traders who pay Class 4 rates will pay 9.73% on profits between £11,909 and £50,270 and 2.73% on profits over £50,270. 

  1. Business Rates

Business rates are being reevaluated on April 1st. 

The new business rates that physical companies will pay is based on the Valuation Office Agency’s (VOA) estimate of a property’s open market rental value on April 1st 2021. 

Directors can get an estimate of their property’s rateable value for 2023/24 here. 

Then from April 6th the Retail, Hospitality and Leisure business rates relief scheme will take effect which will give eligible properties 75% relief on business rates up to a limit of £110,000 per business. 

  1. Corporation Tax

Despite internal party pressure, the Chancellor remained unmoved from the previous budget announcement in October 2022 when previous chancellor Kwasi Kwarteng announced that Corporation Tax was rising by six points from 19% to 25%. 

The headline 25% rate will only affect companies with profits of £250,000 and over with small companies with profits up to £50,000 paying a rate of 19%. Any profits between these two figures will be subject to an increasing tapered rate but marginal relief will be granted.

You can calculate the level of corporation tax marginal relief here.  

The “super deduction” ends on March 31st and will be replaced by a new system called Full Expensing. 

  1. Full Expensing

This new measure introduced is called Full Expensing on capital purchases which will run until March 31 2026. 

This deduction allows businesses to immediately deduct every pound invested in IT equipment, plant or machinery from profits rather than incrementally or months after any purchase.  

The Treasury expects this measure to cost it £9 billion every year for the length of the scheme. 

The kinds of equipment is varied and depends on the industry but includes warehousing equipment, tools, computers, printers, vehicles, office equipment and furniture along with fire alarm systems. 

  1. 50% First Year Allowance (FYA)

Businesses can also deduct 50% of the costs of any other plant and machinery known as special rate assets, from their profits during the year of purchase.  

This includes longer life assets such as solar panels and thermal insulation within buildings. For each year following the first year, 6% of the remaining cost will be written off via writing down allowances (WDAs). The FYA allows for faster relief than under a default WDA regime which is worth 6% easy year including the first year. 

Along with Full Expensing, this will run from April 1 2023 to March 31 2026.

  1. Annual Investment Allowance

The annual investment allowance (AIA) provides 100% tax relief on certain assets including most plant and machinery and is designed to encourage people to invest in their business growth and expansion. 

Cars are excluded as are items you owned for another reason before you used them in your business or items given to you or the company.  

The maximum amount that can be claimed will remain at £1 million. 

  1. Research and development (R&D)

A new tax credit will be created for loss making SMEs that spend 40% or more of their expenditure on R&D. This enhanced credit for research intensive businesses will be worth £27 for every £100 invested rather than the £18.60 that can be claimed by non R&D intensive loss makers. 

The R&D Expenditure Credit rate will increase from 13% to 20% as was announced in the Autumn Statement. 

  1. Small Businesses

Some technical tweaks to the tax system were also announced that were aimed at making the tax system easier for small businesses. 

These include changes to the Enterprise Management Incentives (EMI) scheme to simplify administration and improving the IT system of tax agents to help them better support clients to reduce the burden on employers. 

There were also several consultations announced including looking to simplify the calculation of income tax for sole traders. 

  1. Income Tax

The income tax rates for 2023/24 are:-

  • Personal allowance – on taxable income up to £12,570 – 0% tax rate
  • Basic rate – on taxable income from £12,571 to £50,270 – 20% tax rate
  • Higher rate – on taxable income from £50,271 to £125,140 – 40% tax rate
  • Additional rate – on taxable income over £125,140 – 45% tax rate
  1. Dividend Tax

From April 6th the following dividend tax rates will apply for directors. 

  • Additional rate – 39.35%
  • Upper rate – 33.75%
  • Ordinary rate – 8.75%

The rate paid on dividends above the allowance is determined by the income tax band the payer is in.  After April 6th the allowance will be cut to £1,000 and then £500 from April 1st 2024. 

  1. Capital Gains Tax (CGT)

Capital Gains Tax is charged on the rising value of assets. If an asset has risen in value over a year and is then sold, CGT is applied. 

From April 6th, the CGT tax free allowance is reduced to £6,000 and then to £3,000 from April 2024. 

  1. Wages

National Living Wage rates will rise as first announced in the Autumn 2022 budget. From April 1st they will be:-

  • £7.49 for employees aged 18 to 20
  • £10.18 for employees aged between 21 to 22
  • £10.42 for employees aged 23 and over

Every business is different and what could be good news for one in the Spring budget might not have any effect on another. 

One thing that will affect every company however is that bills, bounce back loans and other outstanding debts still have to be paid and that HMRC and other creditors will continue to pursue them as corporate insolvencies continue to rise.

This is why we continue to offer a free initial consultation for any business owner or director that wants one at a convenient time for them. 

They can detail the circumstances their company is facing and one of our team of expert advisors will then be able to give them specific and detailed options and information based on this. 

Directors tend to find that the earlier in the process they get in touch, the more choices they will have and greater room to manoeuvre depending on their end goals for their company. 

But none of this can happen without them making the most important decision and choosing to speak with a BusinessRescueExpert.