Spring Budget Update
From potholes to swimming pools, Jeremy Hunt announced his Budget for Growth as Chancellor on 16 March 2023, based on his four pillars for growth:
Enterprise, Employment, Education and Everywhere.
Here’s our summary of the key points;
From 6 April 2023 the lifetime allowance charge for pensions will be removed and abolished from April 2024. The tax-free lump sum which can be taken on retirement will remain at 25% of the current lifetime allowance of £268,275 (or 25% of your enhanced lifetime allowance if already protected). This measure will ensure that pensioners can draw their pensions without fear of incurring a penalty tax charge.
The pension annual allowance is set to increase by 50% from £40,000 to £60,000. This is useful for individual’s looking to maximise the amount of pension savings eligible for tax relief. The adjusted income threshold for the tapered annual allowance will increase to £260,000 from 6 April 2023 and the minimum tapered annual allowance for individuals who earn £360,000 or more will increase from £4,000 to £10,000. If you suspect that your pension annual allowance will be tapered and you have no brought forward allowances, you could consider deferring further pension contributions to the tax year commencing 6 April 2023. The marginal rate of corporation tax for companies with profits between £50,000 and £250,000 is increasing to 26.5% from 1 April 2023. This is yet another reason to defer pension contributions to the new tax year.
Working parents will be able to access 30 hours of free childcare per week for 38 weeks of the year from when a child is 9 months to school age. The initiative will be rolled out in stages. From April 2024, all working parents of 2 year olds will be able to access 15 hours per week. From September 2024 this will widen to parents of children aged 9 months up to 3 years old. From September 2025 the number of hours of free childcare will increase to 30 hours. All adults in the household must be working at least 16 hours per week.
From 1 April 2023 to 31 March 2026, companies can claim 100% capital allowances on qualifying expenditure on new plant and machinery (excluding cars). This is referred to as ‘full expensing’ because 100% of the expenditure will be written off against taxable profits. Eligible expenditure includes computers, office equipment, vans and lorries, tools, construction equipment and fire alarm systems. A 50% first year allowance will be available on new special rate assets until 31 March 2026. Qualifying expenditure includes long life assets and integral features, such as air conditioning and solar panels. These reliefs are in addition to the £1 million annual investment allowance which can be claimed by companies, sole traders and most partnerships.
From 1 April 2023 onwards loss making SMEs who incur R&D expenditure equal to at least 40% of their overall cost basis will be eligible for a credit equal to £27 for every £100 of qualifying expenditure. From 1 August 2023 all R&D claims submitted by a company must be accompanied by an additional information form submitted online. This will include specific information about the company’s R&D activities.
Social Investment Tax Relief will expire in April 2023. New investments made on or after 6 April 2023 will no longer qualify for income and capital gains tax relief.
From 2024/25 changes will be introduced to the Self-Assessment Tax Return requiring amounts in respect of cryptoassets to be identified separately. This is part of an effort to tackle tax avoidance.
From 6 April 2023 separating spouses have up to three tax years from the year they cease to live together to transfer assets on a no gain, no loss basis. Previously transfers after the tax year of separation took place at market value often resulting in a charge to capital gains tax.
HMRC has entered into consultation to expand the cash basis for the self-employed. This includes increasing the turnover thresholds for businesses, setting the cash basis as the default, increasing the limit on interest deductions and relaxing restrictions on relief for losses against non-trading income.
Apprenticeship programmes known as ‘Returnships’ aimed at the over 50s are to be introduced to help experienced workers return to the workplace. Alongside in-person midlife MOTs which will assist with financial planning, it is hoped that the measures will help plug the gap in skilled workers.
The Energy Bills Discount Scheme will provide all eligible businesses and other non-domestic energy users across the UK with a discount on high energy bills until 31 March 2024, following the end of the current Energy Bill Relief Scheme.
Finally, in a bid to win over long suffering drivers The Chancellor announced an extra £200 million pounds to deal with the ‘curse of potholes’ along with a freeze in fuel duty.
As always, there will be more detail to come and the devil is always in the detail.
Where there is change, there will always be opportunities for planning, so don’t forget to check-in with us on your upcoming plans before you make any committments in case of any impact on your tax liability.
Tune in to our next LIVE Tax Clinic where we’ll be discussing some key planning measures ahead of the tax year end.
