Spring Budget 2023: what does it mean for small businesses?

Chancellor Jeremy Hunt delivered his Spring Budget announcement on the government’s spending plans today. From tax changes to energy bill support, here’s what small businesses need to know.

At 12.30pm on 15 March, Hunt gave his second fiscal statement to Parliament since becoming chancellor of the exchequer. This is his first full Budget though, with measures revealed alongside an independent report on the UK economy from the Office for Budget Responsibility (OBR).

Key Spring Budget announcements for SMEs

OBR forecasts now say that the UK economy won’t enter a ‘technical recession’ this year. What does this mean for you?

Here are the key Budget announcements that could impact small businesses and the self-employed.

Energy price cap is going ahead…

Despite the ongoing economic challenges and cost of doing business crisis, the energy bill price cap increase still going ahead in April.

This means businesses will get a discount on wholesale prices of gas and electricity, rather than a fixed price. The Energy Bill Discount Scheme is set to run until 31 March 2024.

Households, however, will benefit from an extension of the Energy Price Guarantee. The government confirmed today that typical energy bills will be capped at £2,500 a month for three more months (April, May, and June).

The government says this would save a typical household £160 a month from April.

Support to reduce childcare costs

As childcare providers and families struggle with soaring costs, there have been calls for the government to do more to support them.

Ahead of the Budget, the Treasury had been considering a huge expansion of free childcare in England based on proposals from the Department for Education.

Today the chancellor announced a series of childcare reforms:

This includes providing 30 hours of free childcare a week to parents of children aged between nine months and two years’ old. Currently only parents with children aged three and four can access free childcare.

Hunt says support will be phased in until every eligible working parent of under five-year-olds gets this support by September 2025.

If you run a nursery, the government has said it will also increase the hourly rate it pays providers from September 2023.

For those on Universal Credit, the cap on childcare support is increasing:

to £951 a month for one child (currently £646 a month)
to £1,630 a month for two or more children (currently £1,108 a month)

The way these payments are made will be changing too, so parents receive the money upfront rather than as a refund.

The government hopes that this expansion of childcare will help encourage parents back to work and boost the economy. This comes as a study from OECD reveals UK childcare costs are among the highest in the world.

Hunt also said new childminders will get incentive payments for joining the sector: £600 for new joiners, and £1,200 for those joining through an agency.

What do you think? Let us know in our short survey.

Tax on draught beer frozen

Hospitality businesses will pay less tax on a pint with the freezing of fuel duty on average-strength draft beer.

From 1 August, the duty on draught beer will be up to 11p lower than the relief for supermarkets.

Read more: How to market your pub – 9 top tips.

5p fuel duty cut extended

The temporary 5p fuel duty cut was due to end on 31 March, but has been extended to April 2024.

Fuel duty was expected to rise with inflation in April, adding 7p a litre to the cost of fuel.

The chancellor also confirmed a freeze on fuel duty for the next 12 months to help save drivers money on tax.

Corporation tax is increasing…

While not strictly a Budget announcement, it’s worth mentioning that corporation tax is increasing from 19 per cent to 25 per cent on 1 April.

This was something Rishi Sunak announced as chancellor in his March 2021 Budget.

Hunt says only 10 per cent of companies will pay the full 25 per cent rate.

…but with more investment for businesses

The government hopes a new investment zone scheme unveiled in the Budget will help encourage investment for businesses in England.

Each zone will get £80m of funding each to use for skills, infrastructure, tax reliefs, and business rates retention.

Eight locations in England will be eligible to host a UK investment zone:

West Midlands
Greater Manchester
North East
South Yorkshire
West Yorkshire
East Midlands
Teeside
Liverpool

There will also be at least one investment zone each in Scotland, Wales, and Northern Ireland.

New investment allowance for businesses

Hunt revealed a new investment allowance that will reduce the tax liabilities for businesses investing in new IT equipment, plant, or machinery. The allowance means businesses can deduct these costs from their profits immediately.

There will also be a new tax credit for small and medium sized businesses that spend 40 per cent of their expenditure on R&D.

Hunt also said tax reliefs for film, TV, and video gaming will be extended.

Tax on pensions is changing

Pensions were a key update in the Budget as the government looks at ways to keep people in work and drive the economy.

The chancellor has announced that the pensions Lifetime Allowance will be abolished. This affects the amount you can save into your pension pots before you start paying tax.

Hunt also said the annual pensions tax-free allowance will increase from £40,000 to £60,000

Read more: What’s the retirement age?

More free training for over 50s

An expansion of the government’s ‘Skills Bootcamps’ will be expanded for the over 50s, offering more free training in sector-based skills.

The scheme currently offers up to 16 weeks of free training with a guaranteed interview with an employer at the end of the course.

Today’s announcement sees funding for more places for people of all ages looking to upskill or find a new job opportunity.

There will be an additional 8,000 Skills Bootcamps places in 2024-25 in England, and 40,000 new Sector-Based Work Academy Programme placements across 2023-24 and 2024-25 in England and Scotland.

Employers can use Skills Bootcamps to recruit staff or help inform course content to address skills shortages in their sector.

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Greater support for swimming pools

Some businesses considered more vulnerable to high energy prices – such as libraries, museums, and certain manufacturers – have been eligible for more support when it comes to energy bills.

Physical activity was one sector not previously considered ‘vulnerable’ to high energy prices, so hasn’t been included in additional energy bill support so far.

However, the government has confirmed in the Budget that additional funding will be made available to support England’s swimming pools.

Sport England will manage a £63m fund that local authorities can apply for. The fund will be to help existing swimming pools manage running costs, energy bills, and maintenance.

In the lead up to the Budget there were calls for more support for swimming pools, leisure centres, and gyms to prevent risk of them closing down.

The Guardian reported that swimming pools closing in record numbers. And research from ukactive found many leisure centres, gyms, and pools are likely to reduce services, cut staffing, and increase pricing without the right support.

‘Small business owners are particularly vulnerable’

Alan Thomas, UK CEO at Simply Business said: “Small business owners are particularly vulnerable at the moment, and the Spring Budget is seen by many small business owners as an opportunity for the government to express its support for SMEs and the self-employed – a community which represents one of the most important contributors to the UK economy.

“While important measures have been put in place, such as an increase in the Annual Investment Allowance to £1m and offering greater support in terms of childcare provisions, the fear remains that these new measures will only scratch the surface. The cost of energy is front of mind for the majority of small businesses, with over half (54 per cent) saying this is the single greatest threat to their business in 2023. The 3 month continuation of the Energy Price Guarantee will be welcome news, but SMEs up and down the country will still have very real concerns as to what comes after that.

“Our research indicates that over a quarter (26 per cent) believe that they, quite frankly, will not be able to pay their bills in 2023. Despite the positive measures introduced, the worry is that many small businesses will not have seen these fears fully extinguished. Accounting for over 99 per cent of all British businesses and 48 per cent of employment, our economy’s recovery is directly linked to SMEs prosperity, and we hope their continued support will present a win-win situation for UK SMEs and the Chancellor’s aspirations for economic growth.”

How do you feel about the Spring Budget today? What might the announcements mean for you and your business? Let us know in the comments or take our quick survey.

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