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Spring 2023 budget update for small businesses

We’ve had the big budget announcement I was waiting for, and sadly it’s pretty pants news for small limited companies!

If you’re a sole trader or landlord, good news for you is that not an awful lot is changing. Rates are staying the same apart from your Capital Gains allowance dropping from £12,300 to £6,000.

If you have been pondering selling shares etc and have a reasonable amount to sell, make sure you make the most of the £12,300 allowance before it is cut in half.

The biggest change for high earners is you will now start paying 45% tax from £125,140. If you aren’t already paying into a personal pension scheme this could be worth looking into to help reduce your tax bill.

Now for Limited Companies, the rubbish news.

Corporation tax is increasing if your profits are over £50,000. The increase will be staggered for profits between £50,000 and £250,000. Once you hit £250,000 you will be paying corp tax at 25%. Which is an ouch.

HMRC are attempting to pretend that they’re helping businesses with their two offerings.

The first is “capital expensing”. This essentially means that if you buy assets for the business like computers you will get the tax relief in the year that you purchase them instead of it being spread out over a number of years. This is great but I don’t know many small businesses buying new equipment endlessly to benefit from this.

The second is around Research and Development tax credits. They have made the amounts you can claim more generous. But again this only helps businesses that are investing in research and development. If you think this might apply to you, let us know and we’ll refer you onto a specialist so you can find out more.

This corp tax rise coupled with the dividend allowance dropping to £1,000 and dividend tax rates staying at 8.75% in the basic rate is a bit of a kick in the backside for directors.

I wouldn’t suggest scrapping the limited company all together, there are still benefits to having it, but I would suggest making sure you know what these changes will cost you. 

If you’re a limited company director and want an idea of what your tax bill will look like from April with the rules as they currently stand we can carry out reviews for you at £100+VAT. This will help you plan ahead and make sure you’re saving enough tax, within this we’ll also review how you’re paying yourself to make sure you’re keeping tax efficient amongst all the changes.

The other big news in the budget was around pensions and life time allowances, but I’ll leave that to financial advisors to talk about as that’s their area of expertise! 

As always, if you want to discuss anything I’ve mentioned just drop me or Jessie an email. 

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