The Chancellor of the Exchequer, Jeremy Hunt, delivered his Spring Budget on 15 March 2023.
Corporation tax
From April 2023, the planned increase in the corporation tax rate to 25% for companies with over £250,000 in profits will go ahead.
Companies with taxable profits up to £50,000 will continue to pay corporation tax at 19%. Profits between £50,000 and £250,000 will be subject to a tapered rate.
Annual Investment Allowances and Capital Allowances
Annual Investment Allowance was previously confirmed at a permanent rate of £1m from April 2023.
In order to replace super-deduction, a new ‘Full Expensing’ deduction is announced from 1 April 2023 until 31 March 2026. The relief allows companies to claim 100% first-year deduction from profit before tax (50% for special pool rate) on qualifying new main-rate plant and machinery investments.
Research and development (R&D)
For expenditure incurred on or after 1 April 2023, R&D tax reliefs will be changed as follows:
The small and medium-sized enterprises (SME) additional deduction will decrease from 130% to 86%.
The SME credit rate will decrease from 14.5% to 10% and the R&D expenditure credit rises from 13% to 20%.
The R&D Intensive SME payable credit is introduced from April 2023 at the rate of 14.5%. A company is considered R&D intensive where its qualifying R&D expenditure is worth 40% or more of its total expenditure. These eligible loss-making companies will be able to claim £27 from HMRC for every £100 of R&D investment, instead of £18.60 for non-R&D intensive loss makers.
Pensions reform
The lifetime pension allowance charge will be removed from April 2023 before the allowance (currently £1,073,100) is abolished entirely from April 2024. Previously a 55% tax charge applied where amounts above this threshold were withdrawn as a lump sum, or 25% if paid as a pension.
The pension annual allowance is increased from £40,000 to £60,000 from April 2023.
Money purchase annual allowance is increased from £4,000 to £10,000, which applies if you have already started drawing a pension.
The threshold at which the Annual Allowance is restricted for high-income individuals is also increasing from £240,000 to £260,000 from 6 April 2023 and the minimum amount after taper is to be increased. From 6 April an individual will see their Annual Allowance reduced by £1 for every £2 their ‘adjusted income’ exceeds £260,000, to a minimum of £10,000 (increase from the current £4,000). Adjusted income includes employer pension contributions, salary, pension receipts, interest, dividends and most other sources of income.
Income tax
Personal tax thresholds (personal allowance, basic and higher-rate thresholds for income tax) are maintained until April 2028 at a current level of £12,570 and £50,270.
The additional rate threshold is reduced from £150,000 to £125,140 from 6 April 2023.
Where annual income exceeds £100,000, personal allowance is lost at a rate of £1 for every £2 of income above £100,000. At the £125,140 point the entire personal allowance has been lost.
National insurance
The national insurance thresholds for all classes will be maintained until April 2028 at the current level. The employment allowance is set to the current level of £5,000.
Dividend allowance
Dividend allowance is reduced from £2,000 to £1,000 from April 2023 and to £500 from April 2024. The threshold of £2,000 has been in place since April 2018.
From 6 April 2022, dividends are taxed at 8.75% (basic rate), 33.75% (higher rate) and 39.35% (additional rate).
National Living Wage
From 1 April 2023, the National Living Wage is increased to £10.42 an hour, for those aged 23 and over.
Inheritance tax
No further changes were announced to the inheritance tax nil-rate band and residence nil-rate band; thresholds are maintained at the current level until April 2028.
Capital gains tax: reduce the annual exempt amount
As previously announced, the annual exemption amount for capital gains tax for individuals will change, from £12,300 to £6,000 from April 2023, then £3,000 from April 2024.
SDLT
Stamp duty land tax (SDLT) cuts for England and Northern Ireland will remain in place until 31 March 2025. From 23 September 2022, the nil-rate threshold of SDLT was increased from £125,000 to £250,000 for all purchasers of residential property in England and Northern Ireland and the nil-rate threshold paid by first-time buyers increased from £300,000 to £425,000.
As previously announced, the maximum purchase price for which First Time Buyers’ Relief can be claimed was increased from £500,000 to £625,000. This will be a temporary SDLT reduction, which will remain in place only until 31 March 2025.
Childcare reforms
It was announced that free childcare for up to 30 hours per week will be extended to all children from 9 months of age to 2 years old, to match the free provision already available to all 3 and 4 year olds.
There are conditions that will apply, and this is not available if either parent of the child has annual income of more than £100,000. Up to 15 hours per week of free care will be available from April 2024 and it is planned that by September 2025 all children under the age of 5 will have full access to 30 hours of free car.
Government grants to install electric vehicle charge points
You can potentially claim 100% of the costs of installing an electric vehicle charging point as a capital allowance. The government extended the 100% First Year Allowance for electric vehicle charge points to 31 March 2025 for corporation tax purposes and 5 April 2025 for income tax purposes.
VAT
No further changes to the VAT thresholds have been announced, and the VAT registration and deregistration thresholds at £85,000 will not change for a further period of two years from 1 April 2024.
Legislation will be introduced to digitise the DIY housebuilders’ scheme and will extend the time limit for making claims from three to six months.
Help for energy costs
The current Energy Price Guarantee which provided support for household energy bills until 31 March 2023 will now be extended to 30 June 2023.