Leading Welsh independent accountancy firm, Bevan Buckland LLP, has given its reaction to this week’s spring Budget, as well as providing comment on the tax planning opportunities that the budget has created for businesses.
Chancellor Jeremy Hunt has set out his first Budget, which provided a clear overview of the Government’s plans for tax and spending in the coming months.
Following the announcement, Jack Parker, Senior Executive at Bevan Buckland LLP shares his thoughts.
Millions in the UK to feel the impact of the budget
Whilst millions of individuals and businesses will feel be affected by the budget, there is a sign that may be light at the end of the tunnel.
“The measures announced today are not as severe as first predicted, however they will impact millions of people across the UK.
“The Chancellor’s announcement to extend the Energy Price Guarantee for a further three months will be welcome news for homeowners, who have been increasingly concerned about energy price hikes and a reduction in Government support from April.
“Energy support is also being offered to millions of people on pre-payment meters to bring their payments in line with those paying via direct debit.
“The Budget will also be welcome news for people on Universal Credit and Benefits who will see their payments rise in line with inflation and receive support with childcare costs.
Corporation Tax increase to have long term effect on businesses
Prior to the announcement, many businesses were concerned about the upcoming increase to Corporation Tax in April, which will see the rate of tax rise from 19 percent to 25 per cent for businesses with profits of £250,000 or more, leaving only those with profits of £50,000 or less continuing to pay the existing tax rate of 19 percent.
For individual taxpayers, the Additional Rate Threshold set to reduce to £125,140.
“These announcements will affect millions of businesses across the UK and have a significant impact on their operations and planning in the years to come. Likewise, over 200,000 people will now find themselves paying tax at the additional tax rate.
Extra support for businesses
“The announcement of investment zones for businesses, which could see them paying a lower tax rate while they operate within these, will undoubtedly give many businesses something to consider in the coming months.
Jack added that “the Chancellor’s introduction of ‘full expensing’ would help many companies grappling with this tax increase.
For the next three years businesses will be able to write off the full cost of qualifying plant and machinery expenditure in the same year they make the investment.
“This new relief sits alongside a number of existing Capital Allowances to help firms better manage their annual tax bill through investment. This new measure goes some way to replacing the lost relief available from the Super Deduction, which ends on 31 March. However, given that the currently Annual Investment Allowance allows businesses to deduct up to £1m per annum on asset purchases, the new ‘full expensing’ is likely to only benefit businesses making significant capital investments.”
R&D Tax Credits
The topic of R&D tax credits was once again on the agenda for the Chancellor, with it being widely recognised that it can provide an important Corporation Tax relief to many SMEs.
In his Autumn Statement, Jeremy Hunt announced changes that would restrict the rate of tax relief and credits for some small and medium-sized enterprises (SMEs)”.
However, to support “British Ingenuity”, the Government has decided to introduce a new enhanced tax relief for loss-making R&D-intensive SMEs.
Eligible companies will be able to receive a tax credit worth £27 from HM Revenue & Customs (HMRC) for every £100 of R&D investment they make.
“This additional relief will be somewhat limited, but it will play a role in driving growth among the most innovative of businesses,” added Jack.
To help people save for the future, the Chancellor also announced that from April 2023 the Annual Pension Allowance would increase from £40,000 to £60,000, allowing people to make more tax-free contributions to their pension savings.
Alongside this, the charge on the Pension Lifetime Allowance will be removed in 2023/24, before the allowance itself is abolished entirely from April 2024.
“Allowing people to save more into their pensions tax-free will help many business owners and workers reduce the overall amount of tax that they pay, potentially allowing them to keep more of their income outside of higher tax bands.
“The measures in the Spring Budget should really act as a prompt for businesses to adjust their current growth plans, as well as using the opportunity to reassess priorities and objectives as we prepare to enter a new financial year.”
Get in touch…
Bevan Buckland LLP has a team of 14 experienced tax specialists and chartered tax advisors, who are ready to offer guidance to both individuals and businesses following this announcement.
Should you or your business require more tailored advice then please get in touch with our team, either by calling us on 01792 410100 or by sending us an email