Industry News - 22nd March 2023
The Chancellor Jeremy Hunt presented his Spring Budget on 15 March 2023. As expected, he resisted pressure to reduce taxes in any significant way and the majority of his announced changes were already in the public domain. According to the Chancellor, the UK economy is on track to grow in the coming year with inflation halving.
We have listed any new variations in the UK tax rates, allowances, reliefs and other matters of interest in the update set out below.
Impact on personal finances
Increase in pensions’ tax support
The present £40,000 cap on annual pension contributions that qualify for Income Tax relief is being increased to £60,000 from 6 April 2023.
The present Lifetime Allowance is being abolished.
Both of these changes are intended to incentivise older employees to continue in work whilst continuing to build additional pension savings.
In addition, the Money Purchase Annual Allowance will increase from £4,000 to £10,000 and the minimum Tapered Annual Allowance will increase from £4,000 to £10,000 from 6 April 2023.
The adjusted income threshold for the Tapered Annual Allowance will also be increased from £240,000 to £260,000 from 6 April 2023.
Childcare support increased
Childcare support in England is being expanded to include children over the age of 9 months. The announcement confirmed 30 hours of free childcare for every child over the age of 9 months, with support being phased in until every single eligible working parent of under 5s gets this support from September 2025.
Extension of Energy Price Guarantee
It was announced that the Energy Price Guarantee cap of £2,500 would be extended for the next three months until 30 June 2023. From 1 July 2023 (rather than 1 April 2023 as previously announced), this guarantee will change so that the typical household will pay on average £3,000 a year (an increase of £500).
Impact on UK businesses
The major announcement affecting business investment, and to reduce the impact of the forthcoming increase in Corporation Tax from April 2023, is the ability of companies to ‘fully expense’ the purchase of qualifying plant and other equipment.
This will include spending on, but is not limited to, warehousing equipment such as forklift trucks, tools such as ladders and drills, construction equipment such as bulldozers and excavators, machines such as computers and printers, vehicles such as tractors, lorries and vans, office equipment such as chairs and desks, and some fixtures such as kitchen and bathroom fittings and fire alarm systems.
Effectively, qualifying purchases can be written off completely against company taxable profits.
The ‘full expensing’ policy will be introduced from 1 April 2023 until 31 March 2026.
R&D tax credits
A £500 million per year package of support for 20,000 research and development (R&D) intensive businesses through changes to R&D tax credits was announced.
Previously agreed changes effective from April 2023
Changes to personal or business finances (from April 2023) that were agreed or announced prior to the Budget presentation by Jeremy Hunt on 15 March are listed below:
• Income Tax and National Insurance: maintain thresholds at 2023-24 levels until April 2028
• Inheritance Tax: maintain thresholds at current level until April 2028
• Income Tax: reduce the dividend allowance from £2,000 to £1,000 from April 2023 and then £500 from April 2024
• Income Tax: reduce the additional rate threshold from £150,000 to £125,140 from April 2023
• Capital Gains Tax: reduce the annual exempt amount from £12,300 to £6,000 from April 2023 then £3,000 from April 2024
• National Insurance: maintain the secondary threshold for employer contributions at current level from April 2023 until April 2028
• VAT: maintain registration threshold at current level £85,000 to 31 March 2026
• First Year Allowance for electric vehicle charge points: extend for a further two years until April 2025
• Capital Gains Tax: extend the period for no gain/no loss transfers to three years for couples that separate or divorce
• Annual Investment Allowance: permanently set at £1m from April 2023
• Income Tax: basis periods reform for the self-employed from April 2024 with transition year in 2023-24
• Corporation Tax: 19% rate for profits up to £50,000, tapering to main rate of 25% for profits over £250,000 from April 2023.
If you have any questions on the Budget and how it may affect you, please get in touch.