By Michelle Daniels, BiKBBI Director of Marketing and Communications
Jeremy Hunt’s 2023 spring budget, announced on Wednesday, seems to cover employment, energy, education, enterprise and much more in what he billed as a ‘budget for growth’.
Hunt was appointed to steady the ship after the catastrophic Truss/Kwarteng mini budget in 2022 sent the financial markets in to a tailspin, and it seems that his latest budget continues to maintain that theme. Reactions to the government’s attempt to stimulate growth have been mixed so far but what do the latest measures mean for KBB installation businesses and installers? Here’s a round up of the key points that will impact your business over the coming months…
The UK will avoid recession and inflation to fall to 2.9% by end of 2023
The chancellor announced that the economy will avoid a ‘technical recession’ (GDP falling by two consecutive quarters) and the Office for Budget Responsibility (OBR) forecasts inflation will drop to 2.9% by the end of 2023. This is good news for everyone but for installers it could signal a continued decline in the extortionate rise in operating costs, particularly materials. It also means the consumer confidence will begin to return, potentially stimulating both the property market and domestic RMI activity.
Fuel duty freeze until March 2024
A 12-month freeze on fuel duty from April 2023 will go some way to providing some much-needed relief for installation businesses reliant on their vehicles to operate. Whilst the predicted saving to drivers of around £100 may not seem like much, the decision to freeze the duty, rather than introduce the government’s planned 11p duty rise, is significant. According to the RAC, analysts expect the price of diesel, especially, to fall further in the coming months but continued rises in the long term with a number of factors in play including the cost of crude oil, delivery costs and, most contentious, retailer margin. It still makes sense to think about a fuel card if you haven’t already. BiKBBI has teamed up with UK Fuels to save its members an additional 3p per litre at the pumps. You can apply for a UK Fuels card here.
Full capital expensing for businesses
From April 2023 until end of March 2026, companies can claim 100% capital allowances on qualifying plant and machinery investments. Full expensing allows you to write off the cost of investment in one go – under full expensing, for every pound you invest, your taxes are cut by up to 25p. For installation businesses, it applies to spending on equipment including, but not limited to, tools, machines such as computers and printers, vehicles (vans and lorries) and office equipment such as chairs and desks. For more information on FE, visit www.gov.uk, speak to your accountant or contact BiKBBI partner, The Accurate Accountant.
Planned corporation tax rise to go ahead
A rise of corporation tax from 19% to 25% set out by Rishi Sunak when he was chancellor will go ahead which will help to repair damage to public finances caused by the pandemic and made worse by Russia’s invasion of Ukraine. Now, this may seem a bit steep but will impact big businesses far more than SMEs and micro SMEs as the current 19% rate will still apply if your profits are £50,000 or less. However, you will pay more tax on profits about this level. The full 25% rate will apply for companies with an annual profit of £250,000 or more. It’s important to remember that profits of non-incorporated businesses (sole traders, partnerships) are taxed via Self-Assessment and will not be affected.
Pensions: Lifetime Allowance abolished and maximum contribution levels increased
If you are nearing retirement or have had the foresight to plan well for your retirement, this is particularly good news for you. Previously, pension benefits held by you that were valued in excess of the lifetime allowance, would have faced an additional tax charge of up to 55% on that excess. The current lifetime allowance stands at £1,073,100 and this means the tax charge will now no longer apply from 6 April 2023.
The next point is not necessarily just for those thinking about retirement but should be a consideration for all. In terms of maximum contributions, the Annual Allowance is the amount that you, with sufficient earnings, can contribute to your pension each year without facing tax charges. This has been increased by 50%, from £40,000 to £60,000. There are restrictions to this limit for some so it’s worth checking out.
Energy support continues for consumers
Whilst it would be easy to be downbeat about the lack of further support from the government for businesses around energy costs, this will be likely to affect installation businesses less than other areas of the sector due to the fact that most do not have business premises as such. We will, however, all continue to benefit from the extended support on our household energy bills. Equally, consumer sentiment and disposable income will rise as a direct result of this support, both of which continue to impact decision making when it comes to investing in home improvements.
Childcare support and ‘returnerships’ to boost the labour market
As a sector that has continued to outperform during the most testing times in the last three years, the impending skills gap crisis has expediated and therefore any intervention by government to bring new, skilled labour in to our industry will always be welcome. The increased support around childcare for working parents could have a positive impact on many of our members who struggle to balance the cost of working versus the cost of childcare. Under the expanded scheme, working parents in England will be able to claim 30 hours free childcare for one and two-year olds, to be rolled out in stages from April 2024.
Another welcome measure is a £63m investment in programmes to encourage retirees over 50 back to work, billed as ‘returnerships’ and skills boot camps.
Now, there is definitely more information needed on how this will work before we get too excited but, in principle this could be a great way to bring much needed skilled, experienced labour back in to our sector.
In summary, the short-term outlook for the UK economy is better than expected. Hunt said despite facing ‘enormous challenges, the UK economy is on the right track’. And on that note, the final bit of good news is that it is going to cost you less for draught beer in your local pub – and for some, that is good reason to celebrate with a pint!
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