On 15th March 2023, Chancellor Jeremy Hunt presented his first budget to the Parliament. The budget aims to boost the UK economy by easing the cost of living crisis and reducing inflation rates. The following sections provide a summary of the key points affecting individuals and businesses.
I. Pension Tax Changes
To encourage individuals to return to work, the government announced significant changes to pension tax limits. These changes aim to help individuals build up retirement savings and improve the incentive to work. The key highlights are:
- The Annual Allowance will increase from £40,000 to £60,000 from April 2023.
- The income level for the tapered Annual Allowance to apply will increase from £240,000 to £260,000 from April 2023.
- The minimum Tapered Annual Allowance will also increase from £4,000 to £10,000 from April 2023.
- The Money Purchase Annual Allowance will increase from £4,000 to £10,000 from April 2023.
- The Lifetime Allowance will be abolished from April 2023.
II. Corporation Tax Increase
The main corporation tax rate is set to increase for the financial year commencing 1st April 2023, as the government aims to raise revenue. The increase will impact companies differently, depending on their size and level of capital expenditure.
III. Capital Expenditure for Companies
Relief for companies on capital expenditure incurred from 1st April 2023 until 31st March 2026 has been reformed. The following changes will apply:
- Companies can continue to make use of the £1m Annual Investment Allowance (AIA).
- Two new temporary first-year allowances for qualifying plant and machinery expenditure will be introduced.
- Companies will obtain 100% relief on capital expenditure which falls within the main rate of capital allowances.
- A 50% tax relief will be obtained on expenditure that would fall within the special rate pool for capital allowance purposes.
IV. Research and Development (R&D)
The government will go ahead with cuts to R&D reliefs for small and medium-sized companies. However, eligible research-intensive companies that spend more than 40% of their total expenditure on R&D can claim £27 for every £100 of qualifying R&D spend. The Research and Development expenditure credit will rise to 20% from 13%, with the SME deduction rate decreasing to 86% from 130% with a credit rate of 10%. However, R&D intensive companies will be able to claim 14.5% rather than 10%.
V. Foster and Shared Lives Carers
Qualifying carers will be able to offset higher allowances against their qualifying care receipts, thereby eliminating more qualifying carers from a liability to tax and Class 4 National Insurance on their receipts. The new allowances from 6th April 2023 will comprise a fixed amount of £18,140 per annum, a weekly amount of £375 for under 11s, and £450 for over 11s. These rates will increase each year in line with the Consumer Price Index.
VI. Reforms to Childcare Support
The government has outlined reforms to the current system to encourage more parents back into the workplace. The following changes will apply:
- 30 hours a week of free childcare for 38 weeks a year for eligible working parents of children aged nine months to three years will be provided from April 2024.
- The hourly rate paid to childcare providers who deliver free hours care will increase.
- The free childcare will be open to parents who both work a minimum of 16 hours a week.
VII. Other Announcements
The Chancellor also announced several other measures, including:
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- The creation of 12 new low-tax investment zones across the UK to “supercharge” hi-tech growth, with successful applicants receiving £80m in support over five years. The zones will be clustered around universities and research centres with the aim of accelerating growth in key industries like life sciences, technology, and creative industries.
- The introduction of a ‘Brexit pubs guarantee’, which will see draught duty prices set at 11p lower than in supermarkets, ensuring that the hospitality sector always pays less tax on pints of beer than supermarket chains.
- Fuel duty will remain frozen, maintaining the 5p cut across the UK.
- The Energy Price Guarantee has been extended by three months to the end of June, ensuring that the average household continues to pay no more than £2,500 per annum on their energy bills.
Summary
The Spring Budget 2023 announced several significant changes that will impact individuals and businesses. The key highlights include the significant changes to pension tax limits, corporation tax increase, and reforms to childcare support. The reforms to relief on capital expenditure and R&D expenditure credit will impact larger companies more than small and medium-sized enterprises. The introduction of 12 new low-tax investment zones and the ‘Brexit pubs guarantee’ will promote economic growth, while the extension of the Energy Price Guarantee will provide relief to households.
About Southside
Southside Accountants is an accounting practice that offers expert advice and support to small businesses. We are highly experienced and qualified professionals,
Southside Accountants Wimbledon can provide tailored solutions to help clients navigate the changes introduced in the Spring Budget 2023.
Our services include tax planning, financial reporting, and business advisory services. Potential clients can contact Southside Accountants to receive the support they need to optimize their financial operations and comply with the new regulations.
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