Spring Budget Update March 2023
Here is a summary of the changes announced in the Spring Statement
Personal Tax
- Pension Tax Limits – From 6 April 2023 HMRC have increased the annual allowance from £40,000 to £60,000 per tax year.
The adjusted income for the tapered annual allowance has also increased from £240,000 to £260,000.
The lifetime allowance has also been removed. - UK Tax Rates 2023/24 –
£0 to £12,570 – 0%
£12,571 to £37,700 – 20%
£37,701 to £125,140 – 40%
Over £125,140 – 45%
- Dividend Allowance –
Dividend Allowance – £1,000
Dividend Basic Rate – 8.75%
Dividend Higher Rate – 33.75%
Dividend Additional Rate – 39.35% - Capital Gains Annual Exemption – £6,000
Business Tax
- Corporation Tax – The Government previously announced that the rate of corporation tax will increase from April 2023 to 25% from the current 19%. This is for companies with profits over £50,000.
- Capital Allowances – The Annual Investment Allowance (AIA) is available to both incorporated and unincorporated businesses. It gives a 100% write-off on certain types of plant and machinery up to certain financial limits per 12-month period. The limit has been £1 million for some time but was scheduled to reduce to £200,000 from April 2023. The government has announced that the temporary £1 million level of the AIA will become permanent and the proposed reduction will not occur.
Research and Development (R&D) Relief
For expenditure on or after 1 April 2023, the Research and Development Expenditure Credit (RDEC) rate will increase from 13% to 20% but the small and medium-sized enterprises (SME) additional deduction will decrease from 130% to 86% and the SME credit rate will decrease from 14.5% to 10%.
A higher rate of SME payable credit of 14.5% will apply to loss-making SMEs which are R&D intensive. To be R&D intensive the ratio of the company’s qualifying R&D expenditure must be 40% or above the company’s ‘total expenditure’ for the period. This equates to a receipt of £27 for every £100 of R&D expenditure.
Indirect Taxes and Duties
Fuel Duty – the cut in the rates of Fuel Duty introduced at Spring Statement in March
2022 will be extended for a further 12 months.
Alcohol Duty – as previously announced, the government will legislate in Spring Finance Bill 2023 for a new structure for alcohol duty, based on the principle of taxation by strength, as well as 2 new reliefs. Duty rates under the revised structure on all alcoholic products produced in, or imported into, the UK are being increased in line with the Retail Price Index (RPI). The new Draught Relief is being increased from 5% to 9.2% for qualifying beer and cider products, and from 20% to 23% for qualifying wine, spirits based and other fermented products. These changes will take effect from 1 August 2023.