Earlier today Jeremy Hunt delivered his first budget in the House of Commons, which set out the government’s financial plans for the year ahead.
In this summary, we take a look at the key points, with a focus on the various tax changes announced.
Personal Tax
The only personal tax changes of note were to the tax relief on pension contributions, as follows:
The amount that an individual can contribute to their pension and get tax relief (i.e. the Annual Allowance) will increase from £40,000 to £60,000 per year from April 2023.
The Government will work to abolish the Lifetime Allowance (currently £1,073,100) in future Budgets.
For those who are already drawing down on their pension, the total amount they can save tax free under the Money Purchase Annual Allowance is to be increased from £4,000 to £10,000 per year from April 2023.
Business Tax
Capital Allowances
The 130% super-deduction ends on 31 March 2023, and will be replaced from 1 April 2023 with ‘full expensing’ - 100% capital allowances for qualifying plant and machinery. This will last for three years, to 31 March 2026, although the Government indicated that it is their ambition to make this permanent. The Government will also introduce 50% first year allowances for ‘special rate’ plant and machinery, including long life assets. These rules apply only for corporation tax purposes.
The Government has also confirmed that the 100% first-year allowance for qualifying expenditure on electric vehicle charge-point equipment will be extended until 31 March 2025 for corporation tax, and 5 April 2025 for income tax.
The government will make the temporary £1,000,000 limit for the Annual Investment Allowance permanent with effect from 1 April 2023. This capital allowance is available to nearly all incorporated and unincorporated businesses, covering expenditure on most plant and machinery including second-hand assets and those acquired for leasing.
Research & Development
From 1 April 2023, a higher rate of relief for loss-making R&D intensive SMEs will be introduced. SME companies whose qualifying R&D expenditure constitutes at least 40% of their total expenditure will be able to obtain an effective credit of 27p for every £1 of qualifying R&D expenditure.
Rate of Corporation Tax
It has been confirmed that the main corporation tax rate will increase from 19% to 25 with effect from 1 April 2023.
Private Equity & Carried Interest
An elective accruals basis for carried interest rules was announced; UK resident investment managers will be able to make an election to accelerate their tax liabilities in order to align their timing with the position in other jurisdictions, where they may obtain double taxation relief.
The tax information and impact note for this measure provides more information: Introducing an elective accruals basis for the carried interest rules.
Other Announcements
Childcare
30 hours of free childcare for working parents in England is to be expanded to cover 1 and 2 year-olds, and this will be rolled out in stages from April 2024.
Families on universal credit will receive childcare support up front instead of in arrears, with the £646-a-month per child cap raised to £951.
Tax fraud
The Government has announced that it will double the maximum sentences for the most egregious cases of tax fraud from 7 to 14 years.
Promoters of Tax Avoidance Schemes
The Government will consult shortly on the introduction of a new criminal offence for promoters of tax avoidance who fail to comply with a legal notice from HMRC to stop promoting a tax avoidance scheme. The Government will also consult on expediting the disqualification of directors of companies involved in promoting tax avoidance including those who exercise control or influence over a company.
Contact Us
Please contact us to find out how the above applies in your circumstances, how you can reduce your tax liabilities and maximise your tax efficiency.
Please note that the above is for general information only and does not constitute financial or tax advice. You should not rely on this information to make or refrain from making any decisions. You should always obtain independent professional advice in respect of your own situation.
