The UK Chancellor of the Exchequer Jeremy Hunt delivered the UK Spring Budget 2023 on 15th March 2023. Several measures were announced concerning personal tax, business tax, indirect taxes and duties, and other measures. However, the most notable change was in pension tax reliefs.
Here are key highlights of spring budget 2023:
Income Tax and Thresholds
The Chancellor did not make any changes to the personal allowance (the amount you can earn each year before you start paying income tax) or the higher-rate tax threshold. These will remain at £12,570 and £50,270, respectively, after being frozen in April 2021 for five years.
Pension Tax Reliefs
The following reforms to pension taxation were announced
• Tax free contribution into pensions is to be raised from £40,000 to £60,000 per annum from April 2023.
• The Government will work to abolish the Lifetime Allowance, £1,073,100, in future Budgets.
• The total amount that can be saved tax free, for those who are already drawing down on their pension, under th Money Purchase Annual Allowance is to be increased from £4,000 to £10,000 from April 2023.
The thresholds for National Insurance contributions (NIC) and inheritance tax are still to be frozen to April 2028.
Dividend and CGT Allowances
There are to be cuts in the dividend allowance (from £2,000 per year to £1,000 per year from April 2023 and £500 from April 2024) and in the annual capital gains tax (CGT) allowance (from £12,300 per year to £6,000 from April 2023 and £3,000 from April 2024). The CGT proceeds reporting limit will also be fixed at £50,000 from April 2023. No changes announced for dividend tax and CGT rates.
The Chancellor confirmed that the main corporation tax rate will increase from 19% to 25% with effect from 1 April 2023.
Research and Development
The Chancellor announced, From 1 April 2023, a higher rate of relief for loss-making R&D intensive SMEs will be introduced. SME firms 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. Moreover, two new categories of qualifying R&D spending will be created, data licences and cloud computing services.
The super-deduction regime will abolish on 31 March 2023, and will be superseded, from 1 April 2023, with ‘full expensing’ – 100% capital allowances for qualifying plant and machinery, which will last for three years to 31 March 2026. The Government will also introduce 50% first year allowances for ‘special rate’ plant and machinery, including long life assets.
The Chancellor has also established that the 100% first-year allowance for qualifying expenditures on electric vehicle charge-point equipment will be protracted until 31 March 2025 for corporation tax, and 5 April 2025 for income tax.
The Government has pronounced 12 Investment Zones across the UK to drive economic growth and “levelling up” the country. The locations that are confirmed until now include Greater Manchester, the West Midlands, the North-east, South Yorkshire, West Yorkshire, Teesside, Liverpool, and East Midlands. Each English Investment Zone will have access to £80m over 5 years, including a single five-year tax package. The introduction of Investment Zones in Scotland, Wales and Northern Ireland will be announced later after working with the devolved authorities there, as per the Chancellor.
Other key highlights
• Fuel duty – The Chancellor has announced that fuel duty will be frozen and a 5p reduction will be maintained for another year.
• Energy price support – The government has decided that the Energy Price Guarantee for households will continue at the current rate for three further months to June 2023, caping the household energy bill to £2,500 per annum. For businesses and other non-domestic energy users, the Energy Bills Relief Scheme is to be swapped with the Energy Bills Discount Scheme through to 31 March 2024.
• Taxation for sovereign investors – The Chancellor announced that there will be no change to the current exemption from direct taxation for sovereign investors.
• Tax fraud – The Chancellor announced that the government will double the maximum sentences from 7 to 14 years for the most egregious cases of tax fraud.
• Tax Avoidance Promotion Schemes – The Chancellor announced that the government will consult shortly on the introduction of a new criminal offence for promoters of tax avoidance after failing to act on a legal notice sent by the HMRC warning to stop promotion of a tax avoidance scheme. The Government will also consult on accelerating the disqualification of directors of companies involved in promotion of these schemes, including those who exercise influence or control over a company.
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