Yesterday, Chancellor Jeremy Hunt presented the ‘Back to Work’ March Budget, and we have summarised some of the key points below.
Recession Update
According to the OBR, the UK is not expected to enter a recession this year, and inflation is predicted to decrease to 2.9% by the end of the year. You can find the full summary from HMT here.
Corporation Tax
As planned, there will be an increase in Corporation Tax from April, with the Main rate rising to 25% on profits of over £250,000. The Small profits rate for companies whose profits are below £50,000, is 19%. Companies* whose profits fall between £50,000 and £250,000 will be able to claim marginal relief that will reduce the rate from the 25% main rate.
*Companies that may not claim marginal relief:-
- a) a non-uk resident company.
- b) a close investment holding company
- c) a company whose profits, including distributions
from unrelated, un-associated companies , are in excess of £250,000
Annual Investment Allowance
The Annual Investment Allowance will be increased to £1m, and a new policy on capital expensing will be introduced to allow ‘full expensing’. This means that businesses will be able to deduct every pound invested in IT equipment, plant, or machinery in full and immediately from their taxable profits.
SME Businesses – Research and Development
Small and medium-sized businesses will be eligible for a credit of £27 for every £100 spent on Research and Development, if they spend 40% or more of their total expenditure on this area.
Energy Update
To bring prepayment meter charges in line with comparable direct debit charges, The Energy Price Guarantee (EPG) will be maintained at £2,500 for another three months, affecting domestic properties only.
Annual Pension Allowance and Life Time Allowance
The Lifetime Allowance will be abolished, and the annual tax-free allowance will be increased from £40,000 to £60,000.
Nursery Fees and Childminders
Incentive payments of £600 will be piloted for childminders, and funding will be increased for nurseries offering free childcare hours. The minimum staff-to-child ratios will be reduced to match those in Scotland.
The thirty hours of free childcare will be extended to children between nine months and three years (three-year-olds are already entitled to thirty hours of childcare). To qualify, all adults in the household must work for sixteen hours or more a week, and no one parent can earn over £100,000 a year under the current scheme. This will be phased in, with fifteen hours of free childcare provided to two-year-olds from April 2024.
Investment Zones
Twelve new investment zones will be created, local governments will form innovation clusters in partnership with local universities and receiving funding from central government.
Fuel Duty
Fuel duty will be frozen, and the 5p reduction will be maintained for a further year.
In conclusion, the ‘Back to Work’ March Budget presented by Chancellor Jeremy Hunt has outlined several significant policy changes and initiatives aimed at stimulating economic growth and supporting businesses, families, and individuals in the UK.
While the increase in Corporation Tax may be a concern for some companies, the increased investment in Research and Development, small business investment allowance, and introduction of ‘full expensing’ policy will provide incentives for businesses to grow and invest in their operations.
Additionally, the measures to support childcare and energy costs, as well as the creation of new investment zones, will have a positive impact on families and local economies. It remains to be seen how these policies will play out in the coming years, but the government’s efforts to provide targeted support and foster innovation are commendable.
Do you have any questions about yesterday’s budget? Call our friendly team on 020 8529 2600.
