Super Deduction Tax Deadline
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Introduction
For the next few days at least small businesses have a choice to make when investing in IT equipment. There is super deduction and now full expensing. Which one is best for your business depends on how much profit you plan to make over the next 12 months.
In this article we take a look at investing in your IT both now and after the 1st April 2023 to determine which one will save you the most money.
Super Deduction
Last year the chancellor announced that super deduction would end on 31st March 2023. This was essentially a tax allowance which allowed 130% of the cost of IT equipment to be offset against a limited company’s profit. Since corporation tax is currently 19% it means that your company’s corporation tax reduces by 130 x 19% = 24.7% of the IT cost.
As an example of this lets assume you want to buy a laptop costing £1000 + VAT
Super deduction allows you to offset £1300 against your profit
This reduces your corporation tax bill by £1300 x 19% = £247
In other words the laptop has cost you £1000 – £247 = £753.
I have a specific article on super deduction, including links to HMRC material, and how this can benefit your business when you buy IT equipment.
However, be aware this scheme ends soon – see the countdown above!
Budget 2023
In the budget announced on 15th March 2023 the chancellor announced a new scheme called Full Expensing which starts on 1st April 2023 and ends March 31st 2026.
This allows a limited company to offset 100% of the cost of IT equipment (amongst other main rate equipment) against your pre-tax profit.
However, the chancellor also confirmed he was moving forward with plans to raise corporation tax from 19% to 25% for businesses that have profits in excess of £250,000. Businesses that have profits of £50,000 or less will continue to pay corporation tax at the rate of 19%. Finally, a sliding scale will exist for companies that have profits between £50,000 and £250,000.
Should you buy new IT equipment now?
With the super deduction scheme ending on 31st March 2023 the question is should you rush out and buy new IT equipment before the deadline or wait for the new full expensing scheme to start on the 1st of April.
In order to answer this you will need to have a basic idea of what your pre-tax profit will be.
If you are confident that it will be below £50,000 then yes you would be better to purchase you IT equipment now.
If you are confident that your pre-tax profit will be more than £250,000 then you would benefit (marginally) by holding off the spend until after 1st April.
The table below shows the amount saved dependant on your corporation tax percentage and whether you use the Super Deduction Scheme or the Full Expensing Scheme.
The example assumes a £10,000 spend on IT equipment.
| 19% Corporation Tax | 25% Corporation Tax | |
|
Super Deduction Before 31st March 2023 |
£2470 saved | – |
|
Full Expensing From 1st April 2023 |
£1900 saved | £2500 saved |
In this example a business remaining on 19% corporation tax would save £2470 before 31st march 2023 but only save £1900 from 1st April
For a business moving to 25% corporation tax it would save £2470 before 31st march 2023 but £2500 from 1st April (a marginal improvement)
IT equipment includes
Laptops, desktops, screens, servers, switches, routers, access points and many other equipment
How much will I save
Your accountant is the best person to advise you and to ensure your business can take advantage of this tax relief. However, to give a general idea as to the sort of cost and corporation tax saving I have included a basic calculator below. The prices are based on business equipment we have supplied to most businesses for general use. This means the price is very much “in the region of” rather than a quote you can hold me to. In case you wondered the price includes labour time so we can configure the kit to your business and ensure it is locked down securely. The aim is that you turn it on and use it.
The form also allows you to send this information to your email address so you have it for general reference. This is completely optional.
PRIVACY WARNING: If you do decide to fill in your email then I will get a copy of your form including your email address. Yes, I promise I won’t be selling or passing over your info to anyone else and I certainly won’t be spamming you myself. I WILL send you a follow up email at some point to remind you about the deadline but I absolutely will not be filling your inbox with rubbish. Remember, you don’t have to input your email to use the form.
Super Deduction Calculator
Super Deduction Calculator
Standard Business PC
Entry level business laptop
24" Monitor
Draytek Business Router
24 Port Managed Switch
Add wireless to your office
Total Cost
Total cost of purchase: [total]
Super Deduction Tax Relief: [item-258_price]
Corporation Tax Saving: £ [variable-3]
Summary
| Description | Information | Quantity | Price |
|---|---|---|---|
| Discount : | |||
| Total : | |||
Choosing the right kit
Stage one is about asking lots of questions. What is right for one business is not right for the next. I believe in chatting through what currently works and what doesn’t work to help you get the right hardware for your circumstances. Many IT Companies sell the fastest and newest tech but I believe there is a better way. In my opinion getting the right IT is about getting something that works for you now and can adapt to your 3-year plan. Have a think about the following questions:
- Will you be opening more offices or branches?
- Are more staff working from home now?
- Is your business in a growth phase? If so, how quickly is it growing?
- Are there new opportunities in your marketplace?
Once we understand your answers to these questions we are better placed to know how to help.
What next?
One of my passions is helping businesses to succeed and if I can help you save some money as well – even better. You can fill out our contact form, phone us or click on the appointment button below and let’s start a conversation to see if I can help your business. Our guarantee:
- There are no hidden charges – this is a 100% free 15 minute consultation with no hidden charges.
- We will never spam you or sell on your contact details.
- We will treat your information with absolute confidentiality.