Key Takeaways from Spring Budget 2023: Corporation Tax Rises and Investment Zones

This week’s Spring Budget saw several measures that will impact small businesses, with the big news being that the rise in Corporation Tax will be going ahead despite calls in some quarters for it to be abolished.

In his first Spring Budget, Chancellor Jeremy Hunt confirmed that the 6% rise, from 19% to 25%, will take effect in April. It should be noted that this isn’t a blanket rise, though, so the current 19% rate will still apply if your annual profits are at or below £50,000. The total 25% rate applies to companies with annual profits of £250,000 or more, with a system of marginal relief for those that fall between the two. You can calculate Marginal Relief for Corporation Tax using a government calculator.

It was also announced that companies will be able to deduct investment in new machinery and technology to lower their taxable profits. With this ‘full expensing’, 100% of qualifying capital expenditure in the UK can be written off against taxable profits in the year it is incurred. This replaces the super-deduction tax break introduced in 2021 and will initially last for three years, although the aim is to make it permanent.

Hunt also announced his intention to deliver 12 Investment Zones across the UK. The West Midlands, Greater Manchester, the North-East, South Yorkshire, West Yorkshire, East Midlands, Teesside and Liverpool were all potential sites, with Scotland, Wales, and Northern Ireland also expected to host at least one each. Businesses operating inside the zones will benefit from enhanced tax breaks and lighter-touch regulations. The zones will each receive £80 million in funding over the next five years.

A partial softening of plans to cut R&D tax credits for small businesses will likely be welcome news for many. Companies in high-tech sectors, such as fintech and AI, which invest up to 40% of their spending in R&D, will now continue to receive an enhanced tax credit worth an extra £27 for every £100. Plans to launch an AI sandbox to trial new, faster approaches to help innovators get cutting-edge products to market were also unveiled.

Finally, fuel duty was frozen for another year, and the 5p cut in the price of petrol and diesel will remain in force.

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Further Reading

Autumn Budget 2021: Five Key Announcements for Small Businesses

Budget 2021: What It Means for Small Businesses

Late Payment Window to Small Suppliers Reduced to 30 Days in the Uk