Very few surprises and a few worries – Some thoughts for business about the Spring budget 2023Posted: Mar 22, 2023

The recent budget may well have not been much of a shake up for the economy but it did contain some things to need to be considered by businesses in the coming months.

A damp squib budget for business?

I don’t think I am on my own in saying that this budget was rather a bland one where business was concerned. I suppose, considering all the political shenanigans at the end of last year, it’s not surprising that we didn’t see any earth shattering changes in the budget. On the one hand a period of stability is something every business in the UK will gratefully accept. On the other though, no big surprises means nothing changing in areas where businesses are potentially going to struggle in the coming year.

• No change to the plan to raise corporation tax to 25%. Well, this one should come as no surprise because it’s been on the cards for long enough for everyone to have done the maths. For a business earning 50k or less profits of course, it won’t apply anyway. If your profits are above that, there is a sliding scale of tax up to the full 25%. Roughly 10% of businesses will pay the highest rate and I suppose there is an argument there that they can afford it. I can’t help but wonder if this won’t lead to ‘profit avoidance’ though
• However, taking into account the above point, for those who do see significant profits it could be a personal hit on the directors, many of whom take dividends of from the very profits that are being taxed. In effect, you now have to earn 6% more for the same return as latest year. I can see directors making decisions with there accountants in respect of the most efficient way of paying director in the tax year 2023/24.
• If you are thinking of a solvent liquidation, then the budget was good news. There was no change to capital gains tax this time. We have all been expecting the increase in capital gains but, although we have seen some changes in past budgets, it seems to be leading a charmed existence at the moment. I think it is still open to changes in the future if the government starts to look for new ways to raise taxes, so if you are considering looking into how to liquidate your solvent company to retire or move on to pastures new, now could be the time. To really understand your personal situation, we will need to look at your assets and work through the best options. Remember though that Members Voluntary Liquidations can take some time to resolve so while capital gains tax remains unaffected this time, the clock may be ticking on making the most of your MVL.
• Less encouraging and probably forgotten by most is the previously announced increases in minimum wage. While I am sure we all welcome the much needed increase in income for those who are often the lowest paid in our society, the fact is that this is a cost to businesses. Again, every business is different so you will need to assess the impact on your finances but, the basic wage increase is around 10% in all categories. If you are in one of the industries such as logistics or manufacturing where minimum wage is common, then you could be looking at a significant increase in your payroll. As I said, while I am sure we all welcome this boost for the workers, it will need to be paid for somewhere. There was precious little in the budget to help with this, so it looks like some companies will be facing a significant hike. The summer may help with energy bills for some, but for warehousing and manufacturing for example a few less lights on is not going to compensate for an across the boards wage increase of 10%. For smaller businesses the new minimum wage levels could be a real hit, particularly in areas such as hospitality where things are already difficult.
• As always, the long term effects of the budget are going to be subject to a range of factors from global economies to local conditions. Hopefully, things will work out well. The economy seems to be rallying a little and there is a glimmer of hope with falling inflation and reducing fuel costs so, there is a little optimism around. Overall though, this budget perhaps did not give businesses the boost they would have hoped for.

If you are concerned about your financial future, there is plenty of advice on our help for directors page and if you think you may be looking at insolvency then please call us or book your free consultation as soon as possible.