Chancellor, Jeremy Hunt, presented his Spring Budget on 15 March 2023. There were no major surprises, as seems to be the case, as media outlets had already released information about the headline announcements in the weeks prior to the announcement. The key points are summarised below:
Corporation Tax
The main Corporation Tax rate will rise from 19% to 25% (for many businesses) on 01 April 2023, as anticipated. The ‘Associated Company’ rules will be in effect.
Capital Allowances
On 31 March 2023, the super deduction tax break regime will come to an end. On 01 April 2023, “full expensing” will take its place.
You are able to deduct 100% of the costs incurred on assets subject to capital allowances, such as plant and machinery, in the year of investment thanks to this relief (which only applies to limited companies). The duration of this is three years, or until 31 March 2026 (although it was indicated that the ambition is to make this permanent).
Along with the regime, two additional capital allowances have been implemented:
Until 31 March 2026, the 50% first-year allowance (FYA) for company spending on new special rate assets (including long-life assets).
The Annual Investment Allowance (AIA), which is available to all businesses, including unincorporated businesses and the majority of partnerships, offers 100% first-year relief for plant and machinery investments up to £1 million.
Research & Development
The R&D tax relief regime will undergo a number of changes beginning on 01 April 2023, so claimant companies should think about getting updated advice if they haven’t already.
The main changes are:
For non-SME businesses, the Research and Development Expenditure Credit (RDEC) will rise from 13% to 20%.
R&D tax relief rates will be lowered from 230% to 186% for SME businesses.
The current payable credit of 14.5% for loss-making SME businesses will only be available to businesses whose R&D spending accounts for at least 40% of their overall spending. The payable credit for R&D claimants who don’t meet the new 40% test will be lowered from 14.5% to 10% of the allowable loss.
Cloud computing services and data licences will now count as qualifying R&D expenses.
Within six months of the end of the accounting period to which the claim relates, new claimants (those who have not made a claim in the previous three years) must notify HMRC of their intention to make an R&D claim.
When submitting an R&D claim, after 01 August 2023, additional information requirements must be met.
Tax Relief for the Creative Industries
The government has improved and changed the tax breaks for movies, TV shows, and video games to continue to support the creative industries. Additionally, they will extend the temporary higher rates of tax relief for theatre, orchestra, and museums and galleries for an additional two years, through to April 2025.
Investing Zones
The UK announced the creation of 12 investment zones with the stated goals of promoting economic development and “levelling up” the nation. The West Midlands, Greater Manchester, the North-East, South Yorkshire, West Yorkshire, the East Midlands, Teesside, and Liverpool are among the confirmed locations.
Each approved zone will have access to £80 million over a five-year period. When designated, special tax locations will gain access to a variety of tax breaks, including reduced stamp duty and land tax, improved capital allowances for machinery and equipment, improved allowances for structures and buildings, and secondary Class 1 National Insurance contributions relief.
VAT
The thresholds for VAT registration and deregistration are still set at £85,000 and £83,000, respectively, rather than rising yearly in line with inflation. This will remain until March 2026.
Fuel Duty
The proposed 11p increase in fuel duty will not go into effect, preserving the 5p reduction from last year for an additional 12 months.
Rates of Alcohol Duty
Additionally, Draught Relief has been increased from 5% to 9.2%, meaning that as of August, the duty rate on draught beer and cider will be up to 11 pence less than the fee on cans or bottles purchased at a supermarket.
Income Tax
Income tax and National Insurance Contribution thresholds and rates remained unchanged (they are both frozen until 05 April 2028).
Pensions
There were significant changes to pension taxation announced:
Starting in April 2023, a person’s annual tax-free pension fund contribution amount will increase from £40,000 to £60,000.
The Lifetime Allowance (LTA), which represents the maximum lifetime tax-advantaged pension savings an individual may accrue, is to be completely eliminated.
The total amount that people who are already taking pension benefits can save tax-free under the Money Purchase Annual Allowance will rise from £4,000 to £10,000 as of April 2023.
OTHER IMPORTANT NOTIFICATIONS
Childcare
Every child over the age of nine months will receive 30 hours of free childcare, which will be phased in until every eligible working parent of children under five receives it by September 2025. Here are the important details:
By September 2025, every child over the age of nine months, with working parents, will receive 30 hours of free childcare, with eligibility matching the current 30-hour offer for children between the ages of three and four. This will be implemented in stages, with 15 hours of free childcare for working parents of children aged 2–3 years going into effect in April 2024 and for working parents of children aged 9–3 months going into effect in September 2024.
In addition, starting in September, the funding given to nurseries for the currently available free hours offers will increase by £204 million, reaching £288 million the following year. To overcome the obstacles to working caused by the lack of wraparound care, schools and local governments will receive funding to increase the supply of wraparound care so that parents of school-age children can drop off their children between 8am and 6pm.
The maximum claim has been increased to £951 for one child and £1,630 for two children—an increase of about 50%—and will now be paid upfront rather than in arrears for childcare costs of parents who start working or increase their hours while receiving Universal Credit.
To increase the number of childminding professionals available and give parents more options and affordable childcare options, a pilot programme offering incentive payments of £600 (rising to £1,200 for those joining through an agency) will begin in the fall of this year.
Energy Prices
The Energy Price Guarantee (EPG) of £2,500 will be will be extended by another three months to 30 June 2023, before increasing to £3,000 until the end of the EPG period on 31 March 2024. For a typical household, these extra three months at £2,500 will be worth £160.
A new programme has been confirmed for corporations, non-profit organisations, and the public sector. The Business Energy Bills Discount Scheme, which offers discounts to non-domestic customers on their gas and electricity bills, will be in effect until 31 March 2024.