Spring Budget 

Editors notes

From the pre-budget teasers that had been given to the press, the budget was intended to address one of the biggest factors holding back growth in the UK economy: a shortage of workers. This was all set against the backdrop of the UK tenuously not falling into a technical recession over the last two quarters and the worries in the banking sector after the collapse of two US banks.

After the madness of 2022 the Chancellor had one job – to be boring! And from a tax perspective the budget was mostly without surprises. Hopes were dashed of a reversal or reduction in some of the tax rises due from April 2023 but also, fears were not realised that more tax rises would be announced. Notably Capital Gains Tax, which has remained untouched in this budget.

There was one area of excitement however, pension contributions rules have been relaxed! From April 2023, you can contribute £60,000 a year (previously £40,000) into your pension without paying a tax charge, and the Lifetime Allowance has been abolished meaning there is no maximum limit to the value of an individual’s pension pot.

The key headlines for business owners:

• Pension contributions annual allowance increased to £60,000 and Lifetime Allowance removed
• Corporation Tax Rate increase to 25% going ahead
• Return of “associated company rules” – impacts your Corporation Tax Rate if you have more than one company
• Announcement of “Fully Expensed” Capital Assets is not likely to make much difference to small businesses

Although the prediction was that the UK will not technically see a recession in 2023, the expectation is that the economy will still shrink a little this year. The data may not represent the reality on an industry-to-industry basis, nor on a business-by-business basis either. Many businesses would not agree ‘there is no recession’ with a number of our clients reporting a delay in collecting money from customers, a notable spending squeeze and businesses and consumers delaying buying decisions. These all impact the success and growth of small businesses.

While the UK economy appears resilient, it isn’t without concern for small business owners, and I suspect that 2023 will still be a challenging year for many.

For a detailed analysis on the above headlines and how these will impact you as a small business owner over the coming tax year, please read our Budget Analysis article on our website.

In this article, we will discuss effective rates of tax, limited company vs sole trade in the current economy and tax environment, and much more.