Jeremy Hunt took to the dispatch box at 12.30pm today to deliver his first Spring Budget to the nation, but what tax changes does this mean for businesses? His speech revolved around the four Es:
Enterprise: providing the right conditions for businesses to succeed
Employment: boosting labour supply, including by encouraging the inactive into work
Everywhere: ensuring the benefits of economic growth are felt across the UK.
Education: providing everyone with the skills and support they need
So what do those four Es mean for businesses and employment?
Enterprise
Let’s start with the first E, Enterprise…
The two main takeaways from this section were:
- The introduction of ‘Full Expensing’ which is further discussed in Kieron’s blog here ; and
- Reforms to the SME research and development regime – click here to read more.
Full expensing is a 100% first-year allowance allowing companies to claim a deduction from taxable profits equal to 100% of their qualifying expenditure in the year that expenditure is incurred.
Full expensing is available to companies subject to Corporation Tax only. Therefore, unincorporated businesses cannot claim, but they are entitled to claim the AIA, which offers the same benefits as full expensing for the investments it covers (up to £1 million per year).
On R&D, the Chancellor announced “further support for R&D intensive Small and Medium Sized Enterprises (SMEs), via an enhanced rate of tax relief for loss-making companies”, which sounds like a positive, but on review of the technical detail the further support turns out to be a slight reversal of the cuts to the R&D scheme that were announced in November 2022.
The current rate of relief for loss-making companies is effectively 33p for every £1 spent. The November 2022 changes reduced that to 18.6p, but now, as a result of the announcement today, the rate of relief will be 27p. The final twist in this tale is that the new rate of relief will only be available to R&D “intensive companies” – defined as those spending over 40% of their total expenditure on R&D activities, the other rates of relief applied regardless of the level of expenditure.
The consultation process in relation to combining the SME and larger RDEC R&D scheme is still on-going but is still in the Governments plans from April 2024.
Employment
Onto Employment, and this was all focused on getting people back to work. Recently, it has been a common agenda topic with clients around employment and getting the right people for the roles, which seems a challenge across all industries post the pandemic.
Hunt commented that there were around 1m job vacancies currently available within the UK, with around 7m (excluding students) out of work for various reasons.
Hunt’s incentives focused on four groups: the long-term sick and disabled, welfare recipients and the unemployed, older workers, and parents.
Focussing on older workers, this was centred around getting particularly doctors and GPs back into the industry to help with the NHS shortages. It was clear from Hunt’s speech that tax charges on pension savings have been a catalyst for early retirement.
Therefore from 6 April 2023, the Lifetime Allowance of around £1m has been completely abolished. This was expected to rise to £1.8m based on pre-announcement and was probably the day’s biggest shock. Hunt also increases the Annual Allowance from £40,000 to £60,000, the Money Purchase Annual Allowance and Tapered Annual Allowance from £4,000 to £10,000, and the adjusted income for Tapered Annual Allowance from £240,000 to £260,000.
Moving onto Parents and this was focussed on Childcare costs where the UK has one of the highest costs as a percentage of income. As it currently stands, a child needs to reach the age of 3 before free childcare can be accessed. To help with this barrier, from April 2024, working parents of 2-year-olds will be able to access 15 hours of free childcare per week. This will be extended to working parents of 9-month to 2-year-olds from September 2024, and from September 2025, all eligible working parents of children aged 9 months up to 3 years will be able to access 30 free hours per week.
Everywhere
Under the category of Everywhere, the focus was around levelling up, which meant the announcement of 12 new Enterprise Investment Zone, with one of those being South Yorkshire.
Each Investment Zone will have access to interventions worth £80 million over 5 years, having access to a single 5-year tax offer matching that in Freeports, consisting of enhanced rates of Capital Allowance, Structures and Buildings Allowance, and relief from Stamp Duty Land Tax, Business Rates and Employer National Insurance Contributions.
Education
On Education, the focus was again on ‘Returnerships’ and getting particularly those over 50’s back into employment.
To aid this, the government will introduce Returnerships, a new offer promoting existing skills interventions to the over-50s, focussing on flexibility and previous experience to reduce training length.
They will be supported by a £63.2 million investment for an additional 8,000 Skills Bootcamps in 2024-25 in England and 40,000 new Sector-Based Work Academy Programme placements across 2023-24 and 2024-25 in England and Scotland.
If you have any questions on anything Budget related, please get in touch with your normal BHP contact.
