Spring Statement 2023

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In case you missed the Spring Statement last week here's a roundup of the headlines and a few snippets that slipped under the radar:

Headlines

The OBR has forecast that Inflation is set to fall to 2.9% by the end of 2023

  • UK expected to avoid recession

  • The energy price guarantee is to remain for further 3 months from April 2023

  • Energy costs for Prepayment meter and direct debit customers are to be aligned

  • 30 hours free childcare to all children aged over 9 months to be in place by September 2025

  • Employment support package for the disabled and long term sick

  • Support for over 50’s to return to work - a new type of apprenticeship called a “returnership” for learning new skills

  • Focus on Employment, Education, Enterprise, Everywhere

  • No major changes to personal and corporate tax rates and allowances  

Capital allowances - full expensing of expenditure for companies

For expenditure incurred from 1 April 2023 to 31 March 2026 a 100% first year allowance will be available on plant and machinery expenditure that would normally qualify for main rate capital allowances and a 50% first year allowances on expenditure that would qualify for special rate allowances.

Note that cars are excluded from the full expensing and the asset purchased must be new and not second hand.

Remember new electric vehicles already qualify for 100% capital allowances until 2025 and the chancellor extended 100% allowances on EV charge points expenditure until 2025 too.

Pension allowances 

The amount that an individual can save into their pension scheme each tax year has been increased from £40,000 to £60,000 with effect from 6 April 2023. The tapered annual allowance threshold has also been increased from £240,000 to £260,000.

The lifetime limit on pension savings has been abolished.

Research & Development update

It has already been announced that the SME enhanced expenditure rate is reducing from 130% to 86% and the credit payable is reducing from 14.5% to 10%. From 1 April 2023 all R&D claims will have to be made digitally and the time limit has been amended to 2 years from the end of the accounting period

The chancellor announced on Wednesday additional support for R&D intensive companies (40% intensity rate) who will be entitled to claim a higher SME payable credit of 14.5% rather than 10%. This additional support will not be available to claim until 1 August 2023 so Companies will either have to delay their claim or submit an amended claim after this date.

Under the Radar 

Some small but still important changes that were announced in the spring statement

  • Capital Gains Tax and Divorce - Separating couples will now have three years to transfer assets between them with no tax due previously this had to be done in the year of separation . No time limit on transfers as part of a formal divorce agreement.

  • EMI Share Options - From 6 April 2024 new EMI options will no longer need to be notified to HMRC within 92 days. The deadline has been extended to 6 July following the end of the tax year

  • Pension Tax Relief Net Pay Arrangements - Low earners who contribute to a pension under a net pay arrangement where contributions are deducted from gross pay are receiving relief at 0%. HMRC will pay top ups to those eligible equivalent to the 20% tax relief.

  • Trusts and Estates - with income under £500 per tax year will no longer be required to pay tax on that income.

  • Cryptoassets - From 2024-25 HMRC are introducing a new section on the personal and trust tax returns for reporting disposals of cryptoassets.

  • Help to Save scheme -Has been extended for a further 18 months to March 2025. This is a savings account aimed at those claiming working tax credit or universal tax credit. The government will add 50p for every £1 saved over the 4 year life span of the account. 

  • Seed Enterprise Investment Scheme - The amount that investors can claim SEIS relief on has increased from  £100,000 to £200,000. The gross asset limit of the company receiving the investment has increased from £200,000 to £350,000. (Announced Autumn 22 coming into effect from 6 April 2023)

Tax Rates and Allowances

There were no changes to the tax rates and allowances in the Spring Statement so here is a recap of the current rates from April 2023 

Corporation Tax

  • Main rate rising to 25% for profits over £250,000

  • Small profits rate of 19% for profits under £50,000

  • Marginal relief for companies with profits between £50,000 and £250,000

  • Annual Investment allowance £1,000,000

Income Tax

  • Personal Allowance - £12,570

  • Personal allowances tapered when income between £100,000 and £125,140

  • Basic rate of 20%, on £37,700

  • Higher rate of 40% on income between £37,701 and £125,140

  • Additional rate of 45% on income over £125,140 

  • Dividends rates of tax 8.75%, 33.75% and 39.35%

  • Dividend allowance reduced to £1,000 from April 2023 and £500 from April 2024

  • Note that different rates may apply for taxpayers living in Northern Ireland, Scotland and Wales.

Capital Gains Tax

  • Annual exemption for individuals - £6,000

  • Annual exemption for Trustees - £3,000

  • CGT rate for residential property and carried interest disposals 18%/28%

  • CGT rate for all other disposals 10%/20%

  • Business asset disposal relief (BADR) - 10% on £1 million lifetime limit.

National Insurance 

  • Employees rate - 12% on £12,570 to £50,270 then 2%

  • Employers rate - 13.8%

  • Class 2 (self employed) £3.45 pw

  • Class 3 (Voluntary) £17.45 pw

  • Class 4 (self employed on profits) 9% on profits between £12,570 and £50,270 then 2%.