On Wednesday 15 March 2023, Chancellor Jeremy Hunt presented us with his spring budget. The Government has stated it is a – ‘budget for growth’ – “aimed at achieving long-term, sustainable economic growth that delivers prosperity for the people of the UK.”

But, what does this really mean for small businesses and sole traders?

Here are our key takeaways that will affect you as a sole trader or a small business going into the 2023-24 tax year:

Tax

• Corporation tax rise from 19% to 25%.  This increase applies to businesses with profits over £250,000.  For companies with profits of £50,000 or less will have corporation tax paid at the ‘small profits rate’ of 19%.  For profits between £50,000 and £250,000 businesses will pay at the main 25% rate, but reduced by a marginal relief.

• Full expensing scheme. ‘Super-deduction’ for plant and machinery bought up to 31 March 2023 is replaced by 100% first-year allowance for qualifying capital expenditure, without upper limit, for three years from 1 April 2023.  That means every £1 invested can immediately be deducted in full from taxable profits.

• Research & Development. Tax credit changes for small businesses.  For expenditure from 1st April 2023, the tax credit rate will increase from 13% to 20%.

• Annual investment allowance. Annual investment allowance for smaller businesses has been increased to £1m.  That means 99% of businesses can deduct the full value of their investment from that year’s taxable profits.

Personal Tax

• Personal tax-free allowance. The main personal tax-free allowance and the 40% tax rate threshold remain frozen at their 2022/23 levels until the end of 2027/28.

• 45% threshold. The 45% threshold is lowered from £150,000 to £125,140 for 2023/24.

• Tax-free dividend allowance. Tax-free dividend allowance falls from £2,000 to £1,000, and CGT annual exempt amount falls from £12,300 to £6,000, for 2023/24.

• Pension savings thresholds. The pension savings thresholds significantly increased: from 6 April 2023, Annual Allowance rises from £40,000 to £60,000 (with related changes to tapering and Lifetime Allowance Charge is abolished; maximum tax-free lump sum remains 25% of former Lifetime Allowance, i.e. £268,275.

We hope you found our key takeaways helpful.

Further information is available on the government website.

For any queries you may have we will be happy to help, please do get in touch.