The chancellor announced the Spring Budget 2023 on Wednesday 15 March 2023, focusing on the 4 pillars of
A lot of the announcements had already been made in the Autumn Budget, so let’s start with what we didn’t know before:
Are we in a recession?
Technically we are not in a recession.
- Chancellor Jeremy Hunt confirmed in his delivery to the House of Commons that the UK economy will shrink by 0.2% this year, but avoid a “technical recession”.
- We’ve seen two consecutive quarters with GDP reducing, with expected return to growth in the 2nd half of the year.
- Inflation is expected to fall from 10.7% at the end of 2022, to 2.9% by the end of 2023.
1. Annual allowance
- From April 2023 you can pay up to £60,000 into your pension, a rise from £40,000.
- What you may not know is that you can also use up the previous 3 years’ unused pension allowances.
What this means to you and your limited company:
- If you are an employee, your company can pay up to £60,000 into your pension each year. This will reduce corporation tax by £11,400 at 19%, or £15,000 at the 25% tax rate.
- If you also had the previous 3 years’ pension allowance available, this could reduce your corporation tax by £34,200 at 19%or £45,000 at 25%.
2. Lifetime pension allowance
- Previously you could only save up to £1,073,100 in your pension before you had to start paying tax.
- This tax has now been abolished
- You should note that Labour are opposed to this move, and would re-introduce the lifetime allowance cap.
What this means to you personally:
- The lifetime allowance charge was previously 55% on the amount above the lifetime allowance, and reported on your personal tax return, so this tax will no longer be due.
Corporation tax changes
- Corporation tax is currently 19% for all companies.
- From April 2023 companies with profits over £250,000 will pay 25% corporation tax
- Companies with profits up to £50,000 will still pay 19% corporation tax
- Companies with profits between £50,000 and £250,000 will pay a marginal rate, between 20% and 25%.
Annual investment allowance
- This will increase to £1 million for all small businesses.
What this means:
- Spend on eligible assets up to £1 million can be deducted from your profits.
- This means you’ll save corporation tax at 19% on the cost of the asset.
Full capital expensing
- This is a new policy, meaning that for the next 3 years, all IT spend can be fully deducted from your profits.
- This could be big news for businesses spending a lot on R & D
Super Deductions still set to end 31 March 2023
- Here’s our earlier blog on Super Deductions for companies.
Research & Development (R&D)
- R & D tax relief will change from 1 April 2023 as follows:
- The additional deduction from SMEs will reduce from 130% to 86%
- SME credit rate reduces from 14.5% to 10%
- R & D expenditure credit rises from 13% to 20%
- R & D intensive SME payable credit introduced
- This is a new initiative, for companies spending more than 40% of it’s total expenditure on R & D.
- This means they can claim back £27 every £100 of R & D spend, instead of £18.60.
- The registration threshold has stayed in place again at £85,000, and will remain until 2024
- The deregistration threshold of £83,000 also remains unchanged.
Investment in AI
The Chancellor is committed to foster the UK’s AI (artificial intelligence) industry, and has made the following announcements:
- AI sandbox to help AI companies get their products to market faster
- Annual £1m prize: The Manchester Prize for the person or team that does the best British AI research.
- This is named after the first ever stored-programme computer built at the University of Manchester in 1948.
- Quantum computing strategy unveiled, with £2.5bn in funding
Audio visual tax reliefs
2 new credits were introduced, replacing the current four:
- Audio-Visual Expenditure Credit (AVEC)
- including films and high-end TV programmes, animations and children’s TV programmes
- Video Games Expenditure Credit (VGEC)
The new credits will attract the following rates of relief:
- Films, high-end TV programmes and video games will have a headline rate of 34%. This equates to 25.5% after corporation tax at 25%.
- Animations and children’s TV programmes will have a headline rate of 39%. This equates to 29.25% after corporation tax at 25%.
Income tax rates and allowances
Income tax allowances remain the same until April 2028:
- Personal allowance: £12,570
- Higher rate threshold: £50,270
- Additional higher rate will reduce from £150,000 to £125,140 from April 2023
You will start to lose your personal allowance when your income rises above £100,000 at £1 for every £2 above £100,000.
Dividend tax and allowances
Dividend tax rates:
- Basic rate dividend tax increased to 8.75% from 7.5% in April 2022
- Higher rate dividend tax to 33.75% from 32.5%
- Additional higher rate dividend tax is now 39.35% up from 38.1%
- The previous tax free dividend allowance of £2,000 reduces to £1,000 from April 2023
- This reduces again to £500 in April 2024
National living wage
- This increases to £10.42 per hour for age 23 and over
- This works out at £18,964 on a 35 hour week
- Apprentice rate is £5.28 per hour
Support for working parents
- Every family will be able to access free childcare of 30 hours a week for children over 9 months.
- This will be introduced from April 2024, with 2 year olds offered 15 hours extra hours free care.
- The aim is that all children will be offered 30 hours childcare by September 2024
Fuel and alcohol duty
- Fuel duty has been frozen for another year and government help with energy bills is being extended for another three months, until June
- The 5p cut to fuel duty on petrol and diesel, due to end in April, will remain for another year
- From August 2023, alcohol taxes in pubs will be 11p in the pound lower than the rate in supermarkets
Help for energy costs
- The energy price guarantee is extended to 30 June 2023
- This was previously set to end on 31 March 2023
Capital gains tax
- The annual exempt amount will reduce from £12,300 to £6,000 in April 2023
- Then it will reduce again to £3,000 from April 2024
Stamp duty land tax (SDLT)
- The tax free threshold for SDLT was increased from £125,000 to £250,000 in September 2022.
- This will stay in place until March 2025.
- First time buyers threshold increased at the same time from £300,000 to £425,000
There is certainly a lot to digest, and rest assured we will be reviewing the above, and all the detail for each of our clients.
Our aim is always that you get the best guidance, but always keeping things simple and straightforward.
If you’d like to have a chat about how we can support you, please check out our How We Work Page!