Each year in March, the UK government announces a spring budget to provide an update on how the government plans to spend its resources and provide insight into its economic policy. The Spring Budget gives the public an understanding of how their taxes are being spent and how the government plans to use its resources to tackle current issues that face the country. This is a vital part of the government's responsibility when it comes to sound financial management, with the spring budget setting the tone for the next financial year.
15th March marked the day of the 2023 UK Spring Budget, announced by the Chancellor of the Exchequer, Jeremy Hunt. The budget will substantially impact the country's economic future, setting the tone for the decisions made in the upcoming financial year.
Jeremy Hunt delivered his second fiscal announcement on 15th March 2023.
We heard about new initiatives and policies that will help shape the economy and measures to strengthen public finances.
The statement is Hunt's second major fiscal announcement since his time in office began back in November 2022. The main points included:
- Getting people back to work
- Investment zones
- Extended childcare support
- Maintained energy support
Following is a quick rundown of the points made and how they will impact you as a small business owner.
Today's budget announcement had a big focus on the economic inactive, which includes those who have retired early, and non-working parents.
The government believes there is a significant gap in the economy left by people in their early 50s who retired early - and that we would benefit by getting them back working to support struggling industries.
There has been a considerable rise in the number of "economically inactive" adults, which causes a problem with the UK's already-soaring inflation.
Hunt proposed an internship-style plan, labelled a "returnership".
Said "returnerships" will provide incentives in the form of skills boot camps and work academies, "targeted at the over 50s who want to return to work".
In addition, free childcare will now extend to under 3-year olds, in a bid to get more parents working. UK childcare is amongst one of the highest-costing across Europe - with 23.82% of earnings on average being spent on full-time childcare from two-parent families and 14.29% from single-parent (as of Feb 2022).
As a result, many parents find it more cost-effective to give up work rather than fork out for childcare. This new support should encourage more parents to return to work as planned, as only families with both parents in full-time employment are entitled.
Source: Money.co.uk
Speaking of the investment plans, Hunt said, "True levelling up must be about local wealth creation and local decision-making to unblock obstacles to regeneration."
There's been talk of a corporation tax rise for almost two years now - with it initially being proposed by Rishi Sunak during his time as Chancellor back in 2021.
Since then, it's been scrapped and reintroduced several times, but now it will rise as planned, from 19% to 25%.
According to Hunt, the rise will only impact 10% of businesses, with the higher rate of 25% only being applied to those who make more than £250,000 in profit.
To mitigate this, the government announced different tax breaks to encourage investment in the UK - as some MPs expressed concerns over the rate rise suppressing growth.
The rise will take effect in April.
Read more on corporation tax and who it affects here.
If you're eligible to pay the higher rate of corporation tax (i.e. making more than £250,000 profit yearly), and feel this could create cash flow issues for you - you could look at getting a business loan. Love Finance offers quick funding and competitive rates so that you can continue paying your bills when they're due without damage to your working capital.
Fill out our short online form and we can determine if your business is eligible.
Alternatively, we can pay your corporation tax bill directly for you.
Investment zones are special economic zones that governments create in their countries to attract foreign direct investment. These zones offer favourable tax incentives, simplified bureaucracy, streamlined customs procedures, and other advantages to businesses. They are used to spur job creation and development in the local area.
The investment zones will provide £80m over five years to businesses in the areas.
Eight of the zones will be in England - in the East Midlands, West Midlands, Greater Manchester, Liverpool City, North East, Tees Valley, South Yorkshire and West Yorkshire. The remaining four will be spread across the rest of the UK in Scotland, Wales and Northern Ireland.
The new investment zones have been likened to "12 new Canary Wharfs".
Tax incentives for the zones consist of full stamp duty land tax relief, 100% business rates relief, 100% first-year capital allowance, an increased structures and buildings allowance, and relief on employer national insurance contributions.
With the ongoing Ukraine crisis, energy prices remain very high, leaving many households struggling to pay bills. Rather than the cap ending as planned on April 1st, it will be extended into the summer - which should help to control rising inflation.
In a statement, Sunak said, "We know people are worried about their bills rising in April, so to give people some peace of mind, we're keeping the Energy Price Guarantee at its current level until the summer".
No change was made to energy bills support for businesses, which will continue into 2024.
All of these announcements the government have made are working to support and build the economy.
A stronger economy provides a range of benefits to small businesses, both directly and indirectly. It generally creates more demand for products and services and a more vibrant market. This leads to more customers, better access to financing and more funds for business expansion and investment. Also, due to the knock-on effects of a strong economy, there tends to be more job opportunities, more disposable income and increased consumer spending. Furthermore, with a strong economy, there are more opportunities for networking and collaboration with other businesses, as well as access to more advanced technologies and ideas. This can lead to greater efficiency and growth for small businesses.
