Insight into new tax breaks

Rebecca Dean, Help to Grow: Management alumni and Director at accountancy firm Unico 3, has given her insights into what some of the tax breaks introduced in the Spring Budget will mean for small businesses and how they can be utilised.

What tax breaks are available?

The UK government recently announced some interesting tax breaks for businesses. The tax breaks are for all businesses that pay corporation tax, and this means a lot of smaller organisations will be impacted. Typically, small businesses have less than 50 employees and a turnover under £6.5 million, estimated to be 99% of the UK business population. 

Capital Allowances

We can all use some aspect of tax breaks in our businesses, starting with Capital Allowances. Speak to your accountant in month 10 or 11 of your financial year. For the next 3 years most planned direct capital expenditure should fit into a 100% tax relief bracket, which will help greatly with your cash flow. Fewer taxes will be due, therefore, you can invest more in your business. 

Capital Allowances cover long-life assets for your businesses, so be sure to put assets on your balance sheet. Lots of legislation quotes ‘main pool assets,’ ‘plant and machinery,’ and ‘main rate and special rate’ expenditure – these are purely classifications of assets and can mean very different things for different businesses.  

All assets will attract some capital allowance, although it’s important to plan your investments with your accountant so you can take advantage of any additional allowances. 

Classifying assess as plant and machinery can be confusing, many business owners think this is for businesses in the manufacturing sector, but it is not.  

Office equipment and IT for service businesses qualify, and so do vans, tools, and even fire alarm systems for commercial buildings, so it’s always best to ask questions about all assets and investments. 

The intention of these tax breaks is to enable future investing – without UK investments the country would come to a very quick standstill. The Government's intention is to give business tax breaks to release perceived spent money (the taxes you’ve saved, and you would normally have to pay) so business owners can invest to grow. 

Full Expensing

The super deduction tax break for the last 2 years was a massive encouragement for UK businesses to bring planned investments forward, and so is its replacement Full Expensing Investments. It allows companies to deduct 100% of monies spent from their taxable profits, in place for the next 3 years.  

Full expensing allowance is only available to Limited companies, although Annual Investment Allowance (AIA) is available to sole traders and partnerships, which gives similar tax breaks of 100% deduction from taxable profits, up to £1 million per year. 

Why have tax breaks changed?

The last few years have been difficult, in business and in life generally, and the UK economy has suffered. We are now seeing the recovery stages of the pandemic, the effects of the Ukraine war, and still some effects of the UK leaving the EU.   

These tax breaks encourage businesses to invest in their businesses, pick up the UK trading market, and help everyone to stay in business. By keeping the pricing of services competitive, we will see some of the tax break savings used to stabilise the country’s business sector.   

Written by Rebecca Dean, Director at the accountancy firm Unico 3, the company offers advice through it's Accounting for Growth page.

Related articles

3rd March 2021

Business schools and Small Business Charter to deliver Help to Grow: Management

Find out about the partnership between the Small Business Charter and the UK Government and the resulting Help to Grow: Management Course

18th May 2022
Sign saying "All you need is less"

What can SMEs do to accelerate their journey to net zero?

Are you striving for Net-Zero? Discover how you can accelerate this journey through help and support that is available to businesses like yours.

Case study
A woman smiling at the camera, wearing a floral jacket and silver necklace. The woman has bobbed hair and is wearing glasses.

Alumni interview: Meet Louise Towler

An interview with Louise Towler