Please note that this article is intended for educational purposes only and should not be deemed to be or used as legal, employment, or health & safety advice. For guidance or advice specific to your business, consult with a qualified professional.
Chancellor of the Exchequer Jeremy Hunt unveiled the contents of his famous red briefcase on 15 March 2023, and it’s looking a lot more promising for businesses.
With the UK avoiding recession by a whisker, the Chancellor was optimistic about reducing inflation and stimulating the economy – welcome news for SMEs. Billed as the “budget for growth”, Mr Hunt declared that his Spring Budget would “remove the obstacles that stop businesses investing and remove the labour shortages that stop them recruiting”.
What is the Spring Budget?
Whether it’s announced in spring or autumn, the UK Budget is a financial statement made to the House of Commons by the Chancellor of the Exchequer.
The Spring Budget 2023 set out the Government’s proposals for changes to taxation and spending policy. It included forecasts for the economy for the next five years (up to and beyond the next election) made by the Office for Budget Responsibility (OBR).
Although it’s on a much larger scale and is funded through taxation, the UK Budget works in a broadly similar way to other types of budgets, such as the one you’ve worked out for your own business.
How often does the UK government release a Budget update?
The Budget usually happens at least once a year (barring any worldwide pandemics), either in the autumn or the spring. It’s one of two annual statements from the Chancellor of the Exchequer to the House of Commons, the other being a statement that’s more commonly known as the “mini-budget”.
In the last couple of years, there have been more budget updates than usual. The last official Budget was presented by Rishi Sunak way back in October 2021. Then Kwasi Kwarteng delivered his in September 2022, followed swiftly by his successor Jeremy Hunt’s own budget in November 2022 in an attempt to calm financial markets.
Although neither of these were official Budget statements, they were both referred to by the media as a “mini budget”.
What are the highlights for businesses in this year’s government’s Spring Budget?
So what are the main Spring Budget business highlights, and what do they mean for your own enterprise? Let’s take a look at all the most noteworthy inclusions and see how they can benefit you.
Energy cap going ahead
There’s some good news and some not-so-good news on energy. Although there was a U-turn on the 20% increase in consumer energy bills, the scaling back of business energy support is set to continue.
The Energy Bills Discount Scheme (EBDS) will run until 31 March 2024, replacing the Energy Bill Relief Scheme (EBRS) from 1 April 2023. Under the new scheme, eligible businesses get a discount on wholesale prices of gas and electricity, rather than paying a fixed price.
Funding for the EBDS will be capped at £5.5 million – a hefty cut from the £18 billion put aside for the six months of the EBRS.
The new scheme will only be available to businesses that pay more than £107 per megawatt-hour (MWh) for gas and £302 per MWh for electricity. It offers a discount of up to £6.97 per MWh of gas and £19.61 per MWh of electricity. Certain industries that use significantly higher levels of energy, such as manufacturing, will be eligible for larger discounts.
Support to reduce childcare costs
If you’re struggling to recruit staff or have young children yourself, your business will certainly benefit from the Chancellor’s moves to help with the cost of childcare. The Spring Budget announced that 30 hours of free childcare would be made available for all children aged over 9 months and up to 5 years’ old, something that will lead to a significant reduction in costs for families.
The scheme will be introduced in stages to ensure there is enough supply in the market. From April 2024, 2-year-olds will receive 15 hours of free childcare. Then, from September 2024, this will be extended to children from 9 months. From September 2025, the 15 hours will increase to 30 hours.
These childcare reforms will have a significant positive impact on small businesses, as many owners, in particular female entrepreneurs, are held back from growth and scale by the soaring costs of childcare.
Tax on draught beer frozen
The Spring Budget business good news continued, this time for those in the pub and hospitality industry. Although alcohol taxes are set to rise in line with inflation from August, an exception was made for draught beer where duty will be frozen. It means that from 1 August 2023, taxes on draught products in pubs will be up to 11p lower than taxes in supermarkets.
The Brexit pub guarantee is so named as it’s a cut that wasn’t possible when the UK was within the EU. British Beer and Pub Association (BBPA) chief executive Emma McClarkin said: “The cut to draught duty as part of the alcohol duty reform is positive and we hope that it will result in a boost for our pubs this summer.”
New investment zone scheme
In a bid to drive economic growth and promote both innovation and “levelling up” at a local level, the Chancellor unveiled 12 entrepreneurial investment zones within the Budget.
There is £80m available over five years for each zone, which local authorities and academic institutions can tailor according to their region. Authorities include West Yorkshire, South Yorkshire, East Midlands, Greater Manchester, North East, Tees Valley, West Midlands and Liverpool region, plus regions from Northern Ireland, Scotland and Wales.
Jeremy Hunt’s vision for “12 potential Canary Wharfs” all over the country would come complete with tax incentives, relaxed planning rules and links with university clusters, something that could play a key role in driving business growth across the UK.
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New tax benefits for small and medium businesses investing in R&D
Businesses that invest heavily in research and development will see a welcome new scheme of tax relief. SMEs that are investing over 40% of their total operating costs in R&D and not yet making a profit will receive a cash payment of 27p for each £1 spent. All other loss-making SMEs will receive a new lower relief rate of approximately 18p, something which was announced in the Chancellor’s Autumn Statement.
The scheme will start from 1 April 2023 and will be welcome news for the UK’s startup tech sector in particular, along with other early-stage businesses with significant R&D expenditure.
In effect, it means that if you were to spend £100,000 on R&D activities, you can claim a £27,000 tax credit, thus representing a massive tax break with a hard cash refund. There are thought to be many business owners who are eligible but who will not claim this relief, so it’s worth thinking extra carefully if what you do in your own business could qualify.
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