The Spring Budget 2023 was delivered yesterday and here are the important highlights as we see them:
Corporation tax
The main corporation tax rate will increase from 19% to 25 with effect from 1 April 2023 as previously planned. This applies to companies with taxable profits exceeding £50,000, with a marginal rate applying between £50,000 and £250,000.
Capital allowances
The super-deduction of 130% on capital expenditure will end on 31 March 2023, and will be replaced from 1 April 2023 with ‘full expensing’, meaning that a company can claim 100% capital allowances for qualifying plant and machinery. This will last for three years until 31 March 2026, although the Government indicated that it is their plan to make this permanent. There will also be a 50% first year allowances for ‘special rate’ plant and machinery. These allowances do not apply to second-hand assets.
The temporary £1m Annual Investment Allowance limit has been made permanent.
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.
Research & Development
There are a lot of changes being planned within the R&D arena; some have now been deferred until 2024.
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 still be able to claim a tax credit at 14.5% for eligible losses made.
In the meantime, the previously announced restriction on the inclusion of some overseas expenditure in R&D tax relief claims is deferred for a year until 1 April 2024, to allow the government to consider the interaction of this with a potential merged R&D relief scheme.
Two new categories of qualifying R&D expenditure will be created, for data licences and cloud computing services.
It has also been announced that all R&D claims filed from 1 August 2023 will need to be filed using the new digital forms, regardless of the accounting period concerned.
Creative industry reliefs
This is a niche area but relevant to some clients in the video and digital development worlds.
From 1 April 2024 the existing additional deduction tax reliefs allowed for films, TV and video games will be reformed. New Audio-Visual Expenditure Credits will be allowed for film and high-end TV (34% credit), and for animation and children’s TV (39% credit). The new Video Games Expenditure Credit will have a credit rate of 34%. Qualifying expenditure for this credit will be expenditure on goods and services that are used or consumed in the UK. Existing video games tax relief will end in April 2027, for games that have not been fully developed by 1 April 2025.
If you think these specialist areas may apply to you now or in future, please get in touch.
Personal tax
There were no changes to previously announced personal income tax and National Insurance Contribution thresholds or rates.
Pension tax relief
As part of a range of measures aimed at increasing economic activity significant reforms to pension taxation were announced:
- The amount that an individual can contribute tax free to their pension fund is to be raised from £40,000 to £60,000 per annum from April 2023.
- The Government will work to abolish the Lifetime Allowance in future Budgets – this currently stands at £1,073,100.
- 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 from April 2023.
Pensions are a very Inheritance Tax (IHT) friendly vehicle as they fall outside the scope of IHT completely. The lifting of the Lifetime Allowance is therefore an opportunity for some people to look at using pensions more within IHT planning.
Other taxes
The government has announced that fuel duty will be frozen and a 5p reduction will be maintained for another year.
Similarly, duty rates of alcohol will be frozen, with the exception of draught products (beer, cider, wine, etc). These changes will take effect from 1 August 2023.
Energy price support
The Energy Price Guarantee for households will continue at the current rate for three further months to June 2023, limiting the typical household energy bill to £2,500 per annum. The Energy Bills Relief Scheme, which supports businesses and other non-domestic energy users, is then to be replaced by the Energy Bills Discount Scheme through to 31 March 2024.