Analysis and commentary on the UK Spring Budget 2023 from FPM’s team of tax experts, identifying the key changes and outlining the practical implications for you and your business.
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On Wednesday 15th March 2023, The Chancellor of the Exchequer Jeremy Hunt presented his first budget, the UK Spring Budget for 2023. A “budget for growth” as he called it, aimed at avoiding a recession for the UK.
So, what did we learn? and how will the new suite of measures introduced impact the UK economy, businesses and families both in the short and medium term?
Here are the key takeaways:
Spring Budget 2023 Explained
The centre piece of the Chancellor’s Spring Budget was a remarkable ‘giveaway’ to benefit higher-earning pension savers who saw their annual contribution limit increased by 50% to £60k and their lifetime allowance scrapped. This measure is designed to encourage high earning public sector workers, especially senior doctors, to delay their retirement plans.
The Chancellor however left untouched the ‘stealth’ tax increases which will impact millions of workers in the face of double-digit inflation. The freezing of thresholds and allowances on income tax, national insurance and inheritance tax until 2028 will, via fiscal drag, place many more ordinary taxpayers into the higher rate tax bracket.
Although corporation tax is increasing from 19% to 25% for large companies, there was some good news for companies who from April will be able to write off capital investment in its entirety against profit to an unlimited amount.
Additionally, the Chancellor unveiled that R&D tax relief would be enhanced for R&D intensive small and medium sized enterprises (SMEs) and whilst the announcement of enhanced relief may be welcomed by those SMEs who benefit from it, it is not quite the giveaway it first appears. For those SMEs that qualify as ‘research intensive’, the proposed increase will, in reality, only partially offset the effect of previously announced cuts in relief. Whilst it will restore the payable credit available to loss making companies to the level it was before those cuts were announced, it will not increase the additional tax deductions available to their previous level.
Those SMEs who do not meet the high bar of spending 40% of their total expenses on R&D required to be classed as ‘research intensive’ will receive nothing from the Budget.
Spring Budget 2023 | Key Highlights
Most tax rates and allowances were announced in advance at the Autumn Statement, so the Budget focused more on spending than on tax.
- The main personal tax-free allowance and the 40% tax rate threshold remain frozen at their 2022/23 levels until the end of 2027/28, representing a tax rise where income increases
- The 45% threshold is lowered from £150,000 to £125,140 for 2023/24
- Tax-free dividend allowance falls from £2,000 to £1,000, and CGT annual exempt amount falls from £12,300 to £6,000, for 2023/24
- Pension savings thresholds significantly increased: from 6 April 2023, Annual Allowance rises from £40,000 to £60,000 (with related changes to tapering and Lifetime Allowance Charge is abolished; maximum tax-free lump sum remains 25% of former Lifetime Allowance, i.e. £268,275
- ISA investment limit remains £20,000
- Increase in limit for shares that can be granted under Company Share Ownership Plans confirmed at £60,000
- Small Enterprise Investment Scheme limits increased from 6 April 2023 – maximum for investor is doubled to £200,000
- IHT thresholds and rates unchanged to the end of 2027/28
- Confirmation of corporation tax rate increase from 19% to 25% from 1 April 2023 for profits over £250,000
- ‘Super-deduction’ for plant and machinery bought up to 31 March 2023 replaced by 100% first-year allowance for qualifying capital expenditure, without upper limit, for three years from 1 April 2023
- Improvements to Research & Development tax reliefs from 1 April 2023
- Reforms to audio-visual tax reliefs from 1 April 2024
- Announcement of 12 ‘Investment Zones’ to be established throughout UK with incentives for investment and employment
- Energy Price Guarantee retained at £2,500 for average household for another 3 months to 1 July 2023
- Significant expansion of free childcare provision to be phased in from April 2024
- Fuel duty frozen, and temporary 5p reduction retained, for another year
- Introduction of ‘Returnerships’ – similar to apprenticeships – to encourage over-50s back into work