Spring Budget 2023 – all you need to know

Today, all eyes were on Chancellor Jeremy Hunt and his Spring Budget speech, with the self-employed, landlords and business owners all hoping that Chancellor didn’t make matters even worse for them.

With the UK economy struggling, soaring inflation, rising gas and electricity bills and interest rates have all added to the challenges of people running businesses across the UK and made today’s fiscal statement pivotal to their future.

We’ve listened to the spring statement today and in this blog summarised the key announcements that may affect you and your business, along with a reminder of other tax changes taking place in April.

Super deduction/Annual Investment Allowance

To help maintain business investment levels, the Chancellor announced the replacement for the capital allowance super deduction which expires on 31 March, this year.

The new scheme will be as follows:

Full Expensing (FE)

From 1 April 2023 to 31 March 2026, businesses can deduct 100% of the cost of certain plant and machinery from their profit before tax. The Chancellor expressed that his hope is to be to make full expensing permanent in the future.

First Year Allowance (FYA)

This allows companies deduct 50% of the cost of other plant and machinery, known as special rate assets, from their profits during the year of purchase. This includes long life assets such as solar panels and thermal insulation on buildings. This scheme has also been extended for three years until 31 March 2026. For each year following the first year, 6% of the remaining cost will be written off via Writing Down Allowances (WDAs).

Corporation tax

With the main rate of corporation tax rising to 25% from 1 April for businesses with profits above £250,000, the impact of this will be that the UK will be seen as a less attractive location for international businesses and will hit the pockets of businesses with higher turnover.

Today, the Chancellor didn’t announce any changes to the previously announced rise to Corporation Tax. Find out more about the planned Corporation Tax Rise here.

Fuel duty

As with previous Chancellors, Mr Hunt has announced his plan on freezing fuel duty that was due to increase in March. This is good news for both the self-employed and businesses with high fuel costs.

Research & Development (R&D)

A new R&D scheme was announced for 20,000 R&D intensive SMEs in the UK from 1 April 2023. This will apply to companies where its qualifying R&D expenditure is worth 40% or more of its total expenditure.

There were also changes for some sectors that claim Audio Visual Tax Relief, with the introduction of expenditure credit at a rate of 34% for film, high end television and video games and 39% for the animation and children’s TV sectors.

It was also confirmed that the qualifying threshold for high end television at £1m would be maintained.

Energy

While wholesale energy prices drop and the average annual household bill soaring, there was some relief for individuals with the government extending the energy price guarantee will remain at £2,500 for the next three months and bringing charges for people with pre-payment meters in line with customers paying by direct debit.

This will help those people running businesses from home to maintain or reduce their energy bills.

However, there was no further government support today for businesses to tackle high energy costs. The only announcements on energy were:

• The extension to the climate change agreement scheme helping to reduce energy costs for companies in eligible industrial sectors by offering discounts to participating business on their Climate Change Levy (CCL).
• A series of announcements from Mr Hunt around gaining energy independence including measures for carbon capture and storage and nuclear energy.

Recruitment & skills shortages

Recruitment and filling skills shortages have been an issue for many businesses in the last couple of years. So, today the Chancellor announced some measures to help businesses to both recruit and retain staff and to encourage people to work longer and not retire early. These measures include:

• A raft of measures aimed at encouraging the over 50’s to stay in work including an over 50’s apprenticeship scheme called “returnerships”, abolishing the lifetime pension allowance and raising the annual pension allowance to £60,000 per year.
• Focus on working parents with plans for an extension of wrap around cover at schools to cover a period of 8 a.m. to 6 p.m.
• Help with childcare costs with the extension of up to 30 hours free childcare per week for children aged 3 to 4 to include children from 9 months to 2 as well. From April 2024, working parents of 2 year-olds will be able to access 15 hours of free childcare per week and from September 2024 that 15 hours will be extended to all children from 9 months up. From September 2025 every single working parent of under 5’s will have access to 30 hours free childcare per week.
• Support for disabled and people on long term sick to get them back to work.
• Help for carers, welfare recipients and those with special education needs to work.

IR35

After the disastrous U-turn on IR35 following Kwasi Kwarteng’s Mini Budget, we continue to see no changes to the IR35 off-payroll working rules. It seems the Government want to avoid any further changes until after a general election as IR35 remains a highly complex area of legislation. This is not good news for contractors and the self-employed with the current regime remaining.

Pensions

The big surprise of today, was the removal of the pension lifetime allowance charge and the increase in the Annual Allowance to £60,000 (currently £40,000) from April 2023.

This is great news for business owners and the self-employed that want to tax efficiently invest more for retirement.

Find out about SSAS Pensions

Personal tax

Today, there were no further changes to personal tax. Following the announcements in the Autumn Statement to freeze income tax annual allowance and income tax thresholds.

Business rates

There were no changes made to the Small Business Rates Relief (SBRR) threshold which is a blow to many small businesses.

Summary

With economic inactivity, households struggling and increasing costs for businesses, Chancellor Jeremy Hunt has today been cautious in his approach to the Budget.

Landlords, the self-employed and business owners were all looking for the Chancellor to help them deal with the current economic issues facing their income and profits.

The UK continues to have a competitive tax regime, however, the rise in Corporation tax is not good for UK businesses.

As always there will be more detail in the lengthy budget document that has been issued by the Government and we will be scrutinising this in the coming days and updating this blog, so keep returning for updates after today.

For more information and bespoke tax planning advice, contact dns accountants today on 03300 886 686, or email on enquiry@dnsaccountants.co.uk.

Previously announced tax changes in April to be aware of

The government continue to increase tax revenue through 'fiscal drag' as they freeze thresholds and allowances in the coming tax year.

A quick summary of just some of the tax changes happening in April that will affect you and your business. For more details read our full blog on April tax changes here.

Corporation Tax

One of the biggest changes in April 2023 is the Corporation Tax increase from 1 April 2023. For companies with profits of less than £50,000, the rate remains at 19%. For businesses whose taxable profits exceed £250,000, the rate will increase to 25%. For companies in between there will be a sliding scale of rates.

Companies with taxable profits between £50,000 and £250,000 will pay tax at a marginal rate of 26.5%.

If you have associated companies (more than one company with common control) or companies under a group structure, the lower-level profits limit (of £50,000) and the upper level limit (of £250,000) will be divided equally.

Contact dns to understand the impact of associated company rules.

Capital Gains Tax

The capital gains tax annual exemption will fall to £6,000 for disposals on or after 6 April 2023 and further reduce the exemption to £3,000 for disposals on or after 6 April 2024. It may be worth trying to make disposals before the end of the 22/23 tax year.

Research and Development Tax credits (R&D)

The Research and Development expenditure Credit (RDEC) rate will increase from 13% to 20% for businesses undertaking Research and Development (R&D) expenditure after April 1, 2023, however the small and medium-sized companies (SME) extra deduction will reduce from 130% to 86% and the SME credit rate would decrease from 14.5% to 10%.

Dividend tax-free allowance

The Chancellor has cut the dividend allowance to £1,000 from 6 April 2023 and reducing it further to £500 from 6 April 2024.

Additionally, from April 2023, the rates of taxation on dividend income will remain as follows:

• the dividend tax basic rate - 8.75%
• the dividend tax higher rate - 33.75%
• the dividend tax additional rate - 39.35%.

Income tax

If you are a higher rate taxpayer, you will be hit with the income tax additional rate threshold (ART) reducing from £150,000 to £125,140 from 6th April 2023. Changes to this additional top rate tax band, means that more taxpayers will pay income tax at the higher rate of 45% once their income goes above £125,140. The new threshold will apply to higher earners in England, Wales, and Northern Ireland.

Basic rate taxpayers are also affected because the income tax personal allowance of £12,570 is frozen until 2028.

For more information and bespoke tax planning advice, contact dns accountants today on 03300 886 686, or email on enquiry@dnsaccountants.co.uk.

About the author

Sumit Agarwal
Sumit Agarwal (ACMA ACA India), the Managing partner of dns accountants is a highly respected accountant with expertise in helping owner-managed businesses.