The 2023 Spring Budget
Sarah Hamilton - March 31st, 2023
The 2023 Spring Budget was delivered by Jeremy Hunt on 15th March 2023, with a number of key updates. Of particular relevance to our clients were the following points:
- Confirmation that from 1 April 2023, the rate of corporation tax will depend on the augmented profits of a company. Marginal relief calculations will be making a re-appearance when a company’s profits are between £50,000 (the lower limit)* and £250,000 (the upper limit)*, with the small profits rate of corporation tax of 19% used where profits do not exceed the lower limit, rising to 25% where profits are greater than the upper limit. *The other important factor will be considering associated companies, the lower and upper limits will be divided by the number of associated companies to determine the tax rate.
- “Full expensing” for new and unused plant and machinery (at 100% for main rate and 50% for special rate expenditure) is to be brought in from 1 April 2023, replacing the current “super-deduction” rules. Care will need to be taken to record these claims accurately, as special rules will then apply on disposal of any assets which have benefitted from this allowance.
- The Annual Investment Allowance is also to be “permanently” fixed at £1 million.
- The amount which a company can raise through Seed Enterprise Investment Scheme (SEIS) will increase from £150,000 to £250,000 – good news for early stage Companies seeking to raise capital.
- Wide-reaching changes aimed at incentivising continued workplace participation over retirement were also announced, including:
- Abolishment of the lifetime allowance, meaning there is no longer a limit to the total tax-relieved value that can be accumulated into registered pension schemes.
- This said however, a pension commencement lump sum upper monetary cap of £268,275 (which is 25% of the 2022/23 standard lifetime allowance) will apply to limit the amount that can be taken tax-free unless the policy holder has pre-existing fixed protection.
- Increasing the annual allowance (total pension input allowed before a tax charge is levied) from £40,000 per tax year to £60,000, with tapering rules now not kicking in until an adjusted income threshold of £260,000 is reached (previously £240,000).
- The minimum annual allowance threshold set to increase from £4,000 to £10,000.
Confirmation was also given that from April 2023 the previously announced deductions in the dividend allowance (to £1,000 in 23/24 and then £500 in 24/25) and Capital Gains Tax Annual Exempt amount (to £6,000 in 23/24 and then £3,000 in 24/25) will be going ahead.
This brings to light significant planning issues to consider as a result of these announcements, especially around the dividends vs. salary calculation and consideration around group structures for Limited Companies.
Our ethos at Richard Sexton & Co LLP is to continue to work with intelligence, integrity and initiative in striving to provide our clients with best possible advice for their particular situations bearing in mind the constantly evolving tax landscape. Do contact us to talk through any questions or concerns.