Jeremy Hunt announced his “budget for growth” from the despatch box, promising to eliminate “obstacles that restrict firms from investing” by addressing labour shortages that prohibit them from hiring and “tear down barriers” that limit people from working.
Hunt alluded to an economy that was ‘on the right track’ and ‘proving the critics wrong’ releasing a prognosis that the UK is certain to avoid going into a technical recession in 2023. Through the OBR, the Chancellor also disclosed that by the end of 2023, the inflation rate is expected to drop to 2.9%.
This is a summary of important points for businesses.
SME investment allowance increases to £1m
First, the Annual Investment Allowance for smaller firms has increased to £1 million, allowing 99% of all enterprises to deduct the full amount of all their investments from the taxable income for that year. According to Hunt, a firm can promptly and fully deduct every pound it spends on IT machinery, plant, or equipment from its taxable income. If SME enterprises spend 40% or more of their overall spending on research and development, they will also be eligible to claim an “enhanced credit” worth £27 for every £100 they spend.
‘Full expensing’ to reduce investment costs
The Chancellor announced, “full capital expensing,” which will allow companies to immediately, rather than over the course of several years, deduct the cost of any eligible investment from their corporation tax obligations. It is envisaged that full expensing will make a company’s decision to invest in a new structure or piece of equipment more appealing. According to the OBR, this will raise corporate investment by 3% a year. The plan is to make the policy permanent “as soon as we can responsibly do so” after the initial three-year implementation period.
Corporation tax to increase to 25%
As anticipated, the corporate tax rate for firms would rise from 19% to 25% starting the following month. Starting in April, businesses with profits of more than £250,000 will be subject to a 25% tax on such earnings. Just 10% of corporations are expected to pay the new full rate, according to the chancellor.
Hospitality sector boost for pubs
Speaking about the beleaguered hospitality industry, the Chancellor announced that, starting on April 1, he will implement what he called a “Brexit pub guarantee” that will make draught beverages in pubs 11p less expensive than those in supermarkets. The great British pub, another one of our most cherished communal institutions, is impacted by Hunt’s “cost of living measure,” according to him.
UK Customs system to be simplified
A new “streamlined customs process” will assist the 363,000 international traders in the UK. Plans to reduce bureaucracy and make it simpler to move products in and out of the nation were outlined by the chancellor. The adjustments would ease administrative constraints on business by allowing traders six extra days to complete forms following border crossings. They will no longer require as many financial guarantees and authorizations.
Pan-UK Investment Zones introduced
12 new Investment Zones were declared by the chancellor. The West Midlands, Greater Manchester, the North East, South Yorkshire, West Yorkshire, the East Midlands, Teesside, and Liverpool will all receive them. Moreover, Scotland, Wales, and Northern Ireland will all have at least one.
Jobs boost in bid to get Britain working again
The Chancellor’s attempts to increase the UK workforce were central to his remarks. 30 hours of free childcare for working parents in England were increased to include one and two-year-olds as a result of a headline measure that was leaked. A new voluntary employment program for disabled individuals called Universal Assistance was unveiled with plans for up to 50,000 spots, as well as “skills boot camps” to entice over-50s who have left the workforce to return.
Pensions lifetime allowance to be abolished
In addition, the Government announced plans to raise the annual tax-free allowance for pensions from £40,000 to £60,000 and eliminate the Lifetime Allowance, which was previously set at £1.07 million and allowed workers to save a total of that amount in pension savings before paying additional taxes.
Energy Price Guarantee extended until the summer
The support program for households will be maintained at present levels for a further three months, the chancellor announced. The Energy Price Guarantee will therefore continue to cost £2,500 per year through the end of July. As long-term contracts that suppliers have purchased reflect the decline in petrol prices, it is anticipated that energy bills will drop significantly in the second part of the year.
£20bn of support for carbon capture
Moreover, steps to lower carbon emissions were described. Hunt announced that he will be allocating up to £20 billion in funding for carbon capture, use, and storage in its early stages. By 2030, the policy is expected to support up to 50,000 employment, draw private sector investment, and assist in the collection of 20–30 million tonnes of CO2. For two more years, the Climate Change Agreement plan will provide qualified businesses with a £60 million tax break on energy saving measures.