Budget 2023 what small business can expect

An extension to the ‘super-deduction’ tax break for business investment and tax breaks for companies that help long-term sick and disabled get back into work are being mooted

UPDATED: This spring’s Budget will focus primarily on halving inflation, the first and most important of Prime Minister Rishi Sunak’s five pledges. But what can small business expect from Budget 2023?

Chancellor Jeremy Hunt is expected to offer only modest help for companies in the March 15 Budget, with no immediate tax cuts likely because of tight constraints on the public finances amid the economic downturn. This at a time when, from April 2023, businesses will be shouldering the highest tax burden since the Labour government after the Second World War.

What is the date for the Budget 2023?

Jeremy Hunt is due to make his Budget 2023 statement on Wednesday, March 15. It will be followed by a forecast on the economy and public finances from the Office for Budget Responsibility.

What time is Budget 2023 expected to take place?

Jeremy Hunt is expected to address MPs in the Commons around noon to deliver the Budget. The Chancellor normally delivers his statement after Prime Minister’s Questions, which typically finish at 12.30pm.

How do I watch the spring Budget?

The Budget will be broadcast live on BBC television and streamed on ParliamentTV.

What can small business expect from Budget 2023?

Corporation Tax

Corporation tax will increase from 19 per cent to 25 per cent from April, as first announced by Rishi Sunak in his 2021 Spring Budget as chancellor. The full force of the tax rise will hit businesses with profits of more than £250,000. Companies with profits of between £50,000 and £250,000 will get some relief. And for small businesses making profits of less than £50,000 there will be no change.

Revamping ‘super-deduction’ tax break

Chancellor Jeremy Hunt and his Treasury team are understood to be looking at a successor to former Chancellor Rishi Sunak’s “super-deduction” tax incentive, the £25bn tax incentive which encouraged business investment by providing 25p off company tax bills for every pound of qualifying spend on plant and machinery, which expires in March.

Business groups including the CBI, IoD and Make UK, the trade body for manufacturers, are concerned about what happens when the super-deduction scheme for capital investment — a two-year measure offering 130 per cent tax relief on companies’ purchases of equipment — ends.

Hunt is set to replace the super-deduction with “full expensing”, which allows 100 per cent of qualifying capital expenditure in the UK to be written off against taxable profits in the year it is incurred.

The Treasury has estimated that “full expensing” would cost £11bn at its peak compared to £25bn for super-deduction but that would fall over time. That is because initially the scheme will include an upfront tax break for new capital spending, alongside allowances for old investment which is currently written off over a number of years.

A CBI survey found that creating a new permanent investment deduction “could boost UK business investment by up to £40 billion a year by 2026”.

CBI director general Tony Danker said: “We know the economy can – and must – break out of its low growth trap, but we will need action on business investment to achieve it. Firms are seeing the end to the super-deduction with nothing to replace it but a big rise in corporation tax. This will have a huge impact on investment and leave the UK falling behind its global competitors.”

Make UK wants the Government to focus tax relief on investment in green plant and machinery, while the IoD wants the super deduction scheme retained on a permanent basis.

BT, Siemens and Virgin Media have all called for the super-deduction tax break to continue. This tax break is of particular importance to telecoms companies as they invest heavily in infrastructure through full-fibre broadband.

>See also: Super-deduction tax break – what is it and how does it work?

Business rates

The Federation of Small Businesses (FSB) wants the Small Business Rates Relief (SBRR) threshold raised to £25,000 (it is currently £15,000), while introducing a new “large business multiplier” for properties with a rateable value above £500,000. This move would not cost the Government anything, the FSB wrote to the Chancellor at the beginning of February.

Green vouchers

With the Government cutting subsidies for companies on their energy bills from April, both the FSB and the CBI want ministers to provide vouchers to small businesses to help them invest in “green” improvements to their premises, including heat pumps, better insulation and solar panels. The FSB has proposed a “Help to Green” voucher worth £5,000 with renovations.

Help with childcare

Business groups see help with childcare as key to getting more women back into a workforce depleted post-COVID and post-Brexit.

The CBI has called for Government support to help parents back into work via some free childcare for one and two-year-olds, while the FSB wants to increase the maximum amount claimable for tax-free childcare from £2,000 to £3,000 per year, as well as exempting nurseries from business rates.

Occupational healthcare subsidies

The Government is to trial covering 80 per cent of the cost of providing healthcare to employees in small and medium-sized firms.

Chancellor Jeremy Hunt should announce trialling the subsidy in the Budget, as part of the Government’s push to get nearly 7m economically-inactive people back into work.

These occupational health subsidies will help pay for SMEs to offering preventative health screening for staff, such as measuring weight and height, blood pressure and body mass index.

Appraisals would be given annually as a kind of “health MoT”, one Government source told the Sunday Times.

Many large companies have inhouse occupational health services such as their own doctors or buy in services from private providers to monitor the health of their workforce. This is seen as prohibitively expensive for small businesses, with owner-directors of SMEs five times less likely to invest in occupational health, according to the newspaper.

Foreign worker rules

Hospitality businesses may be able to recruit foreign chefs as well as restaurant and hotel managers more easily under an update to the points-based post-Brexit immigration system.

The Government has asked the Migration Advisory Committee (MAC) to review what it can do for sectors facing labour shortages, including construction, hospitality and retail, by way of tweaking the shortage occupation list.

The list, which was last reviewed in 2020, sets out the skilled jobs for which there is a short supply of domestic workers and makes it easier to recruit people from abroad.

It does this primarily by reducing the salary threshold under which foreign workers can qualify for a skilled worker visa to come to Britain. While the salary threshold is £25,600 at present, roles on the shortage occupation list can be offered at £20,480 or at a 20 per cent discount, whichever is higher. It also reduces the cost for businesses to sponsor a visa for a foreign worker.

Investment zones

Meanwhile, the Treasury is planning to announce up to 10 so-called “investment zones”, which will enable businesses operating inside them to benefit from enhanced tax relief and lighter-touch regulations.

Digital skills and IT training

Another idea is to offer Government-funded job placements for disability and sickness claimants. The focus is expected to be on digital and IT skills for jobs that can be done remotely – helpful for those who are housebound but want to get back into work.

Fuel duty

The Government is expected to extend the 5p cut to of fuel duty, which was due to expire in April. Extending the cut for another year could cost in the region of £6bn.

Fuel duty is supposed to rise by RPI inflation in April, which would add 7p to the price of a litre of fuel. Plus the temporary 5p fuel duty cut, announced by then Chancellor Rishi Sunak in March 2022, is also due to expire this March. These two factors combined mean the cost of fuel duty would rise by 23 per cent – an extra 12p per litre.

However, the RPI fuel duty increase has been cancelled by every chancellor every year since 2011, making it politically difficult for the current resident of Number 11 Downing Street to back a rise.

R&D tax credits

The Government announced cuts to R&D tax credits for UK’s SMEs and start-ups in the Autumn Statement. From April 2023, the R&D tax credit for SMEs will decrease from 130 per cent to 86 per cent from April 2023.  Going forward, the R&D tax credit will be worth only 18.6p for every pound of R&D spend compared with the current 33.3p – changes that will cost SMEs £4.5bn in lost tax benefits over the first five years of the new system.

However, the Chancellor has said he is open to reforming the system again in 2024/5 and the FSB has suggested that he makes 2023-24 a transition year maintain R&D tax relief rate at 130 per cent.

Tax breaks for self-employed training

One glaring anomaly in the current tax system is that businesses can claim for training courses against tax but the self-employed cannot. The FSB would like this distinction to be removed.

What will not be in Budget 2023 for small business

At present, any pitches for cuts to corporation tax, National Insurance Contributions (NICs) or duties are being stonewalled.

“Computer says no is just the standard response you get most of the time from the Treasury, but it’s even worse this time round,” one business leader told The Sunday Times. “He mentioned pre-profit taxes, but every time we raise business rates, NICs and duties, the answer is no, it’s not the right time.”

This preview of what small business can expect from this year’s Budget 2023 will be continually updated.

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Tim Adler

Tim Adler is group editor of Small Business, Growth Business and Information Age. He is a former commissioning editor at the Daily Telegraph, who has written for the Financial Times, The Times and the...

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