The Chancellor of the Exchequer, Jeremy Hunt, recently announced the new spring budget, accompanied by a complete financial statement from the OBR. What does it mean for small business owners like you? Find out in our summary.

The Chancellor has previously said that the economic plan would be based on four ‘E’ pillars: Enterprise, Education, Employment and Everywhere. He has also stated that the Government’s long-term ambition is for the UK to have “the most competitive tax regime of any major country.”

In his January speech, the Chancellor said, “our ambition should be to have nothing less than the most competitive tax regime of any major country”. Of course, many businesses hope for a road map on how the Government hopes to reach this goal.

Here are the key points of the new Spring budget.

Corporation Tax

The corporation tax will rise from 19% to 25% from 1st April. 

Rishi Sunak first announced this in his 2021 Spring Budget as Chancellor. This tax rise will fully hit businesses with profits of more than £250,000. 

Those with profits between £50,000 and £250,000 will get some relief. There is no change for companies making profits of less than £50,000.

Many are concerned that this will negatively impact the Uk’s international competitiveness.

Annual Investment Allowance

Small businesses see their Annual Investment Allowance increased to £1m. This enables them to deduct the full value of their investment from taxable profits.

The £25bn super deduction tax break has been replaced by a new tax break called “full expensing”. Small businesses can deduct new machinery and technology investments to lower taxable profits.

This “full expensing” tax break is in place for the next three years, intending to make it permanent potentially.

Pensions lifetime allowance to be abolished

The pension Lifetime Allowance has been abolished before paying extra tax – currently £1.07m.

The pensions annual tax-free allowance is increased from £40,000 to £60,000.

R&D tax credits

There is a partial softening of measures to diminish R&D tax credits for small or medium-sized businesses.

SMEs can claim a credit worth £27 for every £100 they spend if they spend 40% or more of their total expenditure on Research and Development.

The high-tech sector businesses investing up to 40% of their spending in R&D will continue to get £27 in tax credit for every £100 spent. 

According to the Government, around 8,000 businesses could benefit from these measures.

Chancellor announces 12 investment zones

Hunt announces 12 new Investment Zones. Businesses operating inside these zones benefit from enhanced tax relief and lighter-touch regulations.

The “investment zones” be spread across the West Midlands, Greater Manchester, the North East, South Yorkshire, West Yorkshire, East Midlands, Teesside and Liverpool. 

There will also be at least one in Scotland, Wales and Northern Ireland.

Fuel duty to remain frozen and 5p cut will stay

The fuel duty will be frozen for another year. The 5p reduction in the price of petrol and diesel will be maintained for a further year. This is the 13th consecutive year a Conservative chancellor has frozen fuel duty.

This will save the average driver £100 next year.

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