What the New Budget Could Mean for Business Owners: Tax Reliefs to Watch

Introduction

With the October Budget just around the corner, business owners across the UK are waiting to see what tax changes might be on the horizon. The Chancellor has hinted at measures to boost the economy, but some believe that tax increases may be inevitable to tackle public finances.

Whether you run a small business or a larger enterprise, it’s crucial to stay informed about potential changes to business tax reliefs that could impact your operations. In this blog, we’ll outline some key tax reliefs to watch for in the upcoming Budget and how to prepare for possible shifts.

R&D Tax Credits – A Potential Target for Reform?

Research and Development (R&D) tax credits are one of the most valuable reliefs for businesses that invest in innovation. These credits allow companies to offset a portion of their R&D costs against their Corporation Tax, reducing their overall tax liability.

However, there have been growing concerns about the abuse of the R&D tax credit system, leading some to speculate that the Budget could tighten the rules or limit eligibility. If your business benefits from R&D tax relief, now is the time to ensure your claims are accurate, well-documented, and compliant with HMRC guidelines to avoid potential clawbacks.

Capital Allowances – Will They Stay Generous?

Currently, businesses can benefit from generous capital allowances, particularly the Annual Investment Allowance (AIA), which lets you deduct the full value of qualifying plant and machinery investments (up to £1 million) from your taxable profits. This has been an essential tool for companies looking to invest in growth.

There is some speculation that the government could reduce this allowance as a cost-saving measure. If your business is planning significant capital investments, it may be worth bringing forward those purchases to maximise your use of current allowances before any changes take effect.

Corporation Tax Rates – Further Increases?

In April 2023, the main rate of Corporation Tax increased to 25% for businesses with profits over £250,000, while small businesses with profits under £50,000 still enjoy the 19% rate. With public spending pressures, there is a chance that the Chancellor could announce further changes to Corporation Tax in the Budget.

Larger businesses should consider reviewing their profit forecasts and exploring tax planning strategies to mitigate the impact of any future rate hikes.

Business Rates Relief – Support for Small Businesses

Business rates have been a hot topic for years, especially for small retailers and high street businesses. The current system provides some reliefs, such as Small Business Rates Relief, which offers significant reductions for businesses with a low rateable value.

With the government looking to support high streets and stimulate local economies, there could be a continuation—or even an expansion—of business rates reliefs in the Budget. Keeping an eye on changes in this area is essential if you’re managing a bricks-and-mortar location.

Entrepreneurs’ Relief – A Valuable Exit Strategy

Entrepreneurs’ Relief, now called Business Asset Disposal Relief, allows business owners to pay a reduced rate of Capital Gains Tax (10%) when they sell their business, up to a lifetime limit of £1 million. This is a valuable tool for entrepreneurs looking to exit their business, but it has been a target for reform in previous Budgets.

If you’re considering selling your business in the near future, it may be wise to act sooner rather than later to lock in the benefits of this relief before any potential changes.

What Can Business Owners Do Now?

With uncertainty surrounding tax reliefs, the best strategy for business owners is to prepare early. Here are a few steps to take now:

• Review your R&D claims to ensure they’re fully compliant.

• Maximise capital allowances by making qualifying investments before the end of the tax year.

• Revisit your tax planning to identify opportunities for minimising your Corporation Tax liability.

• Consider your long-term business strategy if you’re thinking about selling or restructuring your business.

Conclusion: Stay Ahead of the Budget

The October Budget could bring both opportunities and challenges for businesses. By staying informed and preparing ahead of time, you can make the most of available tax reliefs and mitigate the impact of any unfavourable changes.

At CBS Accountants, we’re here to help. Our team offers expert guidance on business tax planning, R&D claims, and reliefs to ensure you’re well-positioned for whatever the Budget brings. Get in touch with us to discuss how we can help your business thrive, no matter the tax landscape.