Time will tell if the measures announced will have the desired effect. For the larger firms the ability to deduct the full cost of qualifying plant and machinery without limit will be beneficial, but most SMEs can already do this through the £1million per year Annual Investment Allowance. The confirmation that this is being retained is good news. The increase to the Annual Allowance for pension contributions aims to solve a problem faced by those with final salary pensions, who see periodic large increases in their deemed contributions at points in their career progression. The removal of the Lifetime Allowance was unexpected and seeks to encourage early retirees back to the workplace. It may do that, but the biggest beneficiaries are likely to be those able to divert significant amounts of capital into their pensions to save IHT.
Keep reading to learn more about the latest budget.
Research and Development
In recent budgets, the government has sought to tackle the perceived abuse of the R&D incentives rather than encourage businesses to consider potential eligibility. The has increased the administrative burden and discouraged some SMEs to claim. This process is likely to continue following the cut to the expenditure uplift and reduction in reclaimable tax credit for loss making SMEs.
Personal Tax
The government confirmed that the personal allowance along with basic and higher rate tax thresholds will all be frozen. There were significant changes to pensions, childcare, qualifying care relief and crypto assets, which will aim to provide individuals and businesses with some much needed support.
Tax Simplification
Despite the closure of the Office for Tax Simplification, the government did announce plans to simplify the process of granting EMI share options and the reporting requirements of certain small trusts with nominal amounts of income. Further proposals are to be discussed during upcoming consultations.
Creative Industries
From April 2024, several tax reliefs will undergo reform following a recent consultation. These tax reliefs include Film Tax Relief (FTR), High-End Television Tax Relief (HETV), Animation Tax Relief (ATR), Children’s TV Tax Relief (CTR), and Video Games Tax Relief (VGTR).
Rather than adjusting taxable profit, tax credits will be calculated based on qualifying expenditures. It’s expected that the conditions for relief will remain the same. These changes are projected to increase the value of tax advantages available. However, they also bring additional complexities.
Employers
The Chancellor focused on supporting people in work in his recent personal finance announcements. Those working low hours will benefit from an increase in the Administrative Earnings Threshold, which will now be equivalent to 18 hours at the National Living Wage for an individual, up from 15 hours.
Investment Zones
A plan is in place to establish eight new Investment zones across England, which will act as “Canary Wharfs,” as well as four additional zones across Scotland, Wales, and Northern Ireland.
These eight zones will include the East Midlands, Greater Manchester, Liverpool, the North East, South Yorkshire, the Tees Valley, the West Midlands, and West Yorkshire, which all have an established or proposed Mayoral Combined Authority (MCA).
Duties
To support British pubs, the Chancellor has announced that draught relief will increase from 1 August, with the beer duty served in pubs being frozen to ensure it remains lower than in supermarkets. Drivers will continue to benefit from the 5p cut in fuel duty for another year.
Sustainability and the Environment
The Chancellor’s Budget included measures to support the development of carbon capture and storage (CCS) technologies, classify nuclear energy as sustainable, and extend the Climate Change Agreement (CCA) scheme. While environmental taxation remained largely unchanged, significant funding will be allocated to environmental technologies, with a £20bn commitment to CCS development.
Pharmacists
Starting May 1, 2023, pharmacists can now extend the VAT exemption on medical provision services. It is worth noting that the more VAT-exempt supplies that are made, the less VAT can be recovered on business costs. This is a concern that pharmacists must take into account as they adjust their income.
At Hugh Davies, we can help you cut through these complex announcements and make sure your businesses objectives are being met. Contact our team</a today to speak to one of our experts!