Today the Chancellor delivered his Spring Budget, outlining the latest economic forecasts and the state of the public finances followed by a series of policy announcements.
Jeremy Hunt’s announcements focused on “the 4 Es – Enterprise, Employment, Education, Everywhere”. This article includes a summary of the key announcements for family firms, including information on some upcoming reviews and future policies.
– The Economy: The OBR predicts the UK will avoid recession in 2023, but the economy will shrink by 0.2%. The UK’s inflation rate is scheduled to fall to 2.9% by the end of the year.
– Business: The rate of corporation tax, paid by businesses on taxable profits over £250,000, will increase from 19% to 25%.
– Full Expensing: From April 2023 until March 2026, investments made by companies in plant and machinery will qualify for a 100% first-year allowance for main rate assets.
– Taxation and Wages: The cap on the amount workers can accumulate in pensions savings over their lifetime before having to pay extra tax is to be abolished.
– Back to Work: A new ‘Returnerships’ apprenticeship targeted at the over 50s will refine existing skills programmes to make them more accessible to older workers.
The Office for Budget Responsibility (OBR) predicts the UK will avoid recession in 2023, but the economy will shrink by 0.2%. The OBS then predicts growth of 1.8% next year, with 2.5% in 2025 and 2.1% in 2026.
The UK’s inflation rate predicted to fall to 2.9% by the end of this year, down from 10.7% in the last three months of 2022.
Company Taxes and Investment
The Chancellor confirmed the previously announced Corporation Tax increase, and unveiled the replacement for the Super Deduction scheme.
This means the main rate of Corporation Tax, paid by businesses on taxable profits over £250,000, will increase from 19% to 25%. Companies with profits between £50,000 and £250,000 will be required to pay between 19% and 25%.
The Chancellor listened to the IFB’s call for Full Expensing when the Super Deduction ends, and announced that from April 2023 until 31 March 2026, investments made by companies in qualifying plant and machinery will qualify for a 100% first-year allowance for main rate assets. Companies will be able to write off the full cost in the year of investment.
Companies investing in special rate (including long life) assets will also benefit from a 50% first-year allowance in the year of investment.
While this is initially announced for three years, the Government have stated that it intends “to make this measure permanent when fiscal conditions allow”.
From 1 April 2023, a higher rate of relief for loss-making R&D intensive SMEs will be introduced. SMEs for which qualifying R&D expenditure constitutes at least 40% of total expenditure will be able to claim a higher payable credit rate of 14.5% for qualifying R&D expenditure.
On tax administration and businesses, the Government also announced a review of tax guidance and forms for small businesses over the next 24 months to make it easier for small businesses to interact with the tax system.
While there was an extension of the Energy Price Guarantee for households, there were no changes or updates to the support available to businesses on energy costs.
You can read the Treasury’s factsheet on company taxes and investment announcements here.
Inheritance Tax and Trusts
For family firms there were a few announcements to note on Inheritance Tax, Agricultural Property Relief and Trusts
On Agricultural Property Relief (APR) the Government is publishing a call for evidence and consultation to explore both the taxation of ecosystem service markets and the potential expansion of agricultural property relief from inheritance tax to cover certain types of environmental land management. The CLA say changing the tax system to include ecosystem would “give farmers and landowners the confidence they need to engage with environmental delivery, improving biodiversity and carbon sequestration.”
There was an additional announcement on APR and Woodlands Relief the scope of which will be restricted to property in the UK from 6 April 2024.
On Trusts and Estates, the Government will extend an existing income tax concession for low-income trusts and estates and provide further changes to make calculations and reporting more straightforward. HMRC also intend to make changes to inheritance tax regulations to remove non-taxpaying trusts from reporting requirements.
Work and Skills
With acute labour and skills shortages, this Budget included measures designed to support more people back into work.
This included announcements on extensions to free childcare provision to one and two-year-olds, and a range of measures to break down barriers to work, including greater access to employment advisers, expanding the number of community hubs that offer health support and additional mental and physical health resources.
A new ‘Returnerships’ apprenticeship targeted at the over 50s will refine existing skills programmes to make them more accessible to older workers, giving them the skills and support they need to find a recognisable path back into work.
There were also announcements on pensions allowances, with an increase to the Annual Allowance from £40,000 to £60,000 from 6 April 2023, and the abolition of the Lifetime Allowance.
There were two announcements on potential future changes around employment rights and flexible working.
The Government confirmed it is supporting Private Members Bills that provide the right to request flexible working and grant specific groups protections or leave entitlements, including enhanced redundancy protection for pregnancy, family leave, carer’s leave, and neonatal care leave.
And the Government will bring forward a call for evidence to launch in Summer 2023 on informal and ad hoc flexible working to better understand informal agreements on flexible working between employees and employers.
Fiona Graham, Director of Policy and External Affairs for the IFB, said: “After months of instability, today’s announcement was a significant step in the right direction. The measures announced by the Chancellor will finally start to tackle some of the long-standing issues and help put Britain back on a clear path to achieving growth targets.
“We are extremely pleased the Chancellor listened to our calls over the past year to introduce a Full Expensing programme. This will provide our members with more confidence to make those long-term investment decisions that are needed as we look to improve productivity and move towards Net Zero. We welcome the Chancellor’s intention to make that regime permanent. With so much change over recent years, we need confirmation of this intention as soon as possible to give businesses certainty on the long-term tax landscape.
“The Back to Work Budget also addressed long-standing reform changes that can help support people to re-enter the workforce and reduce the labour gap that many of our members are struggling with. Whilst noting the announcements on skills and ‘Returnerships’ there is more to do in this important area. We will be asking the Chancellor to build on today’s announcements with a plan in the Autumn to overhaul the Apprenticeship Levy.”
Included in the Red Book was the confirmation that the Treasury will hold a Tax Administration and Maintenance Day again this year. This will see the Government will bring forward a further set of tax administration and maintenance announcements later in the spring, and has previously included the announcement and publication of consultations on tax policy.
We are awaiting confirmation of the date for that, and will monitor those developments closely.