Chancellor Jeremy Hunt has announced a multibillion-pound package of business incentives in his Spring Budget 2023 helping small business offset corporation tax rising to 25 per cent from next month.
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.
Annual Investment Allowance
Smaller businesses have had their Annual Investment Allowance increased to £1m, allowing them to deduct the full value of their investment from taxable profits.
Full expensing business investment
Hunt has replaced the £25bn super-deduction tax break 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 £9bn 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.
Investment zones
Meanwhile, the Treasury has announced a dozen “investment zones”, which will enable businesses operating inside them to benefit from enhanced tax relief and lighter-touch regulations. including 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 each of Scotland, Wales and Northern Ireland.
The location of these investment zones must show a partnership “between local government and a university or research institute in a way that catalyses new innovation clusters,” Mr Hunt said.
R&D tax credits
The Chancellor has announced a partial softening on measures to slash R&D tax credits for small businesses.
In the Autumn Statement, the Chancellor reigned-in a scheme which allowed start-ups to claim back taxes from their research spending.
Now businesses in the most high tech sectors, including fintech and artificial intelligence, which invest up to 40 per cent of their spending in R&D, will continue to receive an enhanced tax credit worth an extra £27 for every £100 spent.
Mr Hunt called this a £1.8bn package of support helping 20,000 cutting-edge companies turning Britain “into a science superpower”.
Fuel duty frozen again
Jeremy Hunt confirmed that fuel duty will be frozen for another year and the 5p cut in the price of petrol and diesel will remain in force, saving the average driver £100 over the coming year. The chancellor said that this would save the average driver £100 over the coming year. This is the 13th consecutive year that a Conservative chancellor has frozen fuel duty.