In March 2023, Chancellor Jeremy Hunt unveiled his Spring Budget speech. The talk was varied, including both benefits and negatives for small businesses, such as the choice to go ahead with increased corporation tax. Luckily, there were several positives to take from the speech, a much-welcome measure for businesses that have been struggling with the long-term consequences of Covid-19, the cost of living crisis and the energy crisis.
The retail experts at UK Shopfront have resultantly looked at the budget to assess some of the key features for both retailers and small business owners alike.
Research & Development Tax Relief
While corporation tax has not increased for businesses making profits of less than £50,000, businesses making more are liable to pay an increase. The rate is between 19% and 25% for businesses earning between £50,000 and £250,000, but any business making more will have to pay the 25% rate.
As such, taking advantage of the research and development tax relief scheme may be an essential tool for small-to-medium-sized enterprises (SMEs) to claim tax relief and pursue innovation. This is particularly beneficial for businesses whose turnover is 40% research and development, meaning the Government is investing in innovation at an increased rate than before. This is only set to continue, meaning SMEs should be considering new solutions as a long-term plan for longevity and success in the market.
Increased Annual Investment Allowance
Between April 2023 and March 2026, companies in the UK can claim 100% capital allowances for certain plant and machinery investments. This is supplemented by taxes being cut by 25p for each pound a company invests and the ability to write off the cost of investment in one go – meaning small businesses can afford the equipment and machinery they need while benefiting from relief on investment costs.
This benefits both the Government and businesses, particularly small businesses, as tax cuts provide more money while incentivising investment into new equipment, assets and machinery. Examples of applicable plant and machinery are also wider than many think, comprising units such as computers, tools, and office equipment such as desks and chairs. These are all items that SMEs could benefit from, especially if they have plans to increase operations.
Frozen Fuel Duty
Nine in ten small businesses have claimed that cars are important to their firms, whether for the transportation of products, fulfilling services or benefitting staff for commuting purposes. Achieving all of these duties is what allows a small business or retailer to retain their competitive advantage – meaning failure to do so could be devastating.
As such, the freeze of duel duty is fundamental for growth amongst these businesses – especially as it can significantly cut costs. However, businesses should be mindful of the environmental impacts of relying heavily on non-electric vehicles, and try to offset these wherever possible.
Energy Bill Discount Scheme
As part of the Spring Budget, the Energy Bill Relief Scheme has been replaced by the Energy Bills Discount Scheme, running until March 31st, 2024. The new scheme offers a discount on gas and electricity unit rates, compared to the previous model, which offered a cap on wholesale gas and electricity prices for non-domestic consumers.
Unfortunately, under the new scheme, the level of support has been cut by two-thirds, a significant figure. However, the warmer weather coming means less demand and wholesale prices are slowly falling, meaning both SMEs and retailers are in a more beneficial position to weather the storm than before. Another alternative was the Government providing no support – meaning while the scheme provides less relief, the measure of support could still be a vital tool for survival.
Investment Zones
One of the highlights of the Spring Budget for all small businesses is the introduction of Investment Zones. These refer to twelve zones in the UK that will provide a variety of fiscal incentives for businesses, such as:
- Stamp Duty Land Tax (SDTL) relief
- 100% relief from Business Rates
- Enhanced capital allowance
- Boosted structures and buildings allowances
- Employer National Insurance Contributions relief
The zones will be spread across the UK, but predominantly located in the North of England, in areas such as Manchester, West Yorkshire and Liverpool. These incentives will resultantly tackle the North-South divide in the UK, ensuring northern businesses are able to compete in terms of investment and growth.
This also means that for any small retailers and businesses considering an expansion or relocation, or any startups trying to locate a physical site, these investment zones could make those dreams come true.
Marina Vassilopoulos writes for UK Shopfront, a London-based retailer of shopfronts and glazing with 30+ years of experience trading.
