Spring Budget 2023 – A few notes for our customers...
On 15th March 2023 the Chancellor of the Exchequer, Jeremy Hunt, delivered the first full UK Government Budget for 17 months. There were a number of significant announcements affecting businesses of all sizes. The following key points relate to issues that we consider will be of particular interest to our customers.
Personal taxation
There are no changes to the income tax bands, with the personal allowances remaining the same as 2022/23. Those earning above £12,570 will pay 20%, those above £50,270 pay 40% and £125,140 stays at 45%.
With regard to dividends, the allowance reduces from £2,000 to £1,000, above which income tax will be payable. The rate for basic rate taxpayers is 8.75%, higher rate taxpayers 33.75% and additional rate taxpayers 39.35%.
Changes to pensions
The annual tax relief has risen from £40,000 to £60,000, the first change for 9 years. The relief only applies to income that is earned and not, for example, paid in dividends or as interest.
The pension lifetime allowance, which currently stands at £1,070,000 is going to be abolished, meaning workers can make unlimited contributions to their pensions without incurring a tax charge. It is hoped that this will boost retention in key sectors, such as the NHS, where highly-skilled people leave the workplace as it becomes uneconomic.
Corporation Tax
The Chancellor confirmed that corporation tax is going to rise from 19% to 25% from April 2023. This was originally announced in the March 2021 Budget and briefly reversed in the September mini-Budget and then reinstated in the 2022 Autumn Statement.
The increase will apply to businesses with profits over £250,000, whereas small businesses (with profits of less than £50,000) will continue to pay a CT rate of 19%. The lower rate will gradually increase for businesses as their profits rise between £50,000 and £250,000.
Rewarding investment
Businesses that incur expenditure on most plant and machinery can claim a tax allowance of 130% of the cost, known as a super deduction. This ends on 1st April 2023, to be replaced with 2 new schemes: full expensing and 50% first year allowance. There is also an annual investment allowance of £1,000,000.
Capital Gains Tax
The CGT annual exempt amount will reduce from £12,300 to £6,000 for the year 2023/24. In the following year it will reduce to £3,000.
VAT
The VAT exemption on healthcare is widened from 1st May 2023 to include medical services carried out by workers who are directly supervised by registered pharmacists. The zero rate on prescriptions will also apply to medicines supplied through patient group directions, which allows health professionals to administer specified medicines to pre-defined groups of patients without having to see a doctor.
New R&D scheme
An enhanced research and development tax credit of 27% will be available to loss-making ‘R&D intensive’ SMEs, specifically those with a spend of 40% or more of total expenditure on qualifying R&D. Qualifying companies will be able to claim £27 from HMRC for every £100 of R&D investment. The new scheme begins on 1st April 2023 and is estimated to be worth approximately £500m per year.
International trade
The Chancellor also announced a set of customs amendments, including measures to look at the simplification of customs import and export processes in order to reduce admin burdens for businesses. This includes increasing the amount of time traders have to submit supplementary declarations and allowing traders to submit just the one supplementary declaration in a month, known as aggregation.
Need some help?
The application and administration of taxation, payroll and customs rules can be complex and difficult to keep up with. Fortunately, UK Training has a number of ‘update’ course designed specifically to meet this need. Click here to find out more.
Written by Paul Murphy
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