The Spring Budget 2023 was announced on 15th March 2023 by the chancellor of the Exchequer, Jeremy Hunt. He outlined the government’s plans for spending and taxation in the coming year.
In last year’s Autumn Statement 2022 announcement, several tax changes affected businesses and individuals.
- Planned increase in the corporation tax rate for some companies to 25% in April 2023, while Capital Allowances were to remain the same.
- R&D tax relief scheme was to undergo some changes to avoid fraudulent claims in the SME scheme
- Employer national insurance contributions thresholds had to be frozen until April 2028
- Income tax was to be frozen until 2028
- Confirmation for a cut in the tax-free dividend allowance from £2,000 to £1,000 in 2023/24.
This article will look at the key announcements made on 15th March 2023 and how they will affect businesses and private individuals in the UK.
Table of Contents
Spring Statement 2023 Impact on Businesses
As planned, the main corporation tax rate will increase from 19% to 25% for businesses with profits that exceed £250,001 as of 1st April 2023.
Companies that make a profit of £50,000 or less per year will continue to pay 19%, and companies that make a profit between £50,001 and £250,000 a year will now pay 25% corporation tax with a ‘marginal relief’ deduction.
As announced in the Autumn Statement, in reference to the globally agreed G20-OECD Pillar 2 framework, it was confirmed that the new multinational top-up tax levied on UK members within a multi-national enterprise group would be introduced.
The super-deduction regime will end on 31st March 2023 and be replaced with ‘full expensing’ from 1st April 2023. This means qualifying plant and machinery will receive 100% capital allowances for three years, until 31st March 2026, with the potential to become permanent.
Research & Development (R&D)
Small and medium-sized companies whose qualifying R&D expenditure is at least 40% of their total spent amount will be able to acquire a credit of 27p for every £1 of qualifying R&D expenditure. This higher relief rate for loss-making R&D intensive SMEs will be effective from 1st April 2023.
No decision has been made on the potential to merge the RDEC and SME schemes. Meanwhile, two new categories, for data licenses and cloud computing services, are to be created, and all R&D claims filed since 1st August 2023 will now need to be filed using new digital forms.
Expansion of the Seed Enterprise Investment Scheme (SEIS)
The Seed Enterprise Investment Scheme (SEIS) was created to help small, early-stage UK-based companies attract investment. The Chancellor announced that the scheme’s monetary thresholds are due to be expanded, and the amount that any company can raise through SEIS is to increase from £150,000 to £250,000 from 6th April 2023. The gross asset limit will be increased from £200,000 to £350,000. Individual investors’ annual investment limit will be increased from £100,000 to £200,000.
Creative & Cultural Industry Tax Reliefs
Film, TV, and video games tax reliefs will be reformed from 1st April 2024. There will be an introduction of new Audio-Visual Expenditure Credits in place of additional deductions, which will be allowed for film and high-end TV at a rate of 34%, and animation and children’s TV at a rate of 39%.
The current tax reliefs are to close to new productions from 1st April 2025, and new tax credits are to be based on the Research and Development Expenditure Credit (RDEC).
The temporary higher rates of Theatre Tax Relief, Orchestra Tax Relief, and Museums and Galleries Exhibitions Tax Relief will be extended for 2 years and is due to expire on 31st March 2026.
The Qualifying Asset Holding Companies (QAHCs)
The Qualifying Asset Holding Companies (QAHCs) regime is also being changed to better align with its intended scope and policy objectives. Several proposed changes were announced, including changes to investment funds and the extension of the existing anti-fragmentation rule.
Real Estate Investment Trusts (REITs)
Mr. Hunt announced that from 1st April 2023, Real Estate Investment Trusts (REITs) no longer need to own at least three properties if they own one commercial property worth £20m or more. Second, if a property is sold within three years of being significantly developed, it will still be considered part of the property rental business. Finally, there will be changes to how tax is deducted from property income distributions paid to partnerships.
At the Spring Budget 2023, several measures were announced to simplify traders’ customs import and export procedures. The government plans to review customs declaration requirements with the aim of engaging stakeholders throughout the year. Measures have been announced, along with the timeline for engagement and the type of engagement planned throughout 2023.
The planned 11p rise in fuel duty will be cancelled in relation to business travel, which means last year’s cut is to be maintained for another year.
Energy Bills Discount Scheme
The chancellor confirmed that the new Energy Bills Discount Scheme for companies is still due to come into effect from April 2023 to allow for a per-unit discount for eligible non-domestic consumers for another year to the 31st March 2024.
Transfer Pricing Documentation
It was confirmed that as outlined in the OECD’s transfer pricing guidelines, large multinational businesses operating in the UK will need to maintain a master file and a local file in an authorized and standard format. This will apply for accounting periods commencing on or after 1st April 2023 for corporation tax purposes and from 2024/25 for income tax purposes.
Spring Statement 2023 Impact on Individuals
The chancellor also made the following announcements that impact private individuals.
Annual Allowance on Pension Tax Relief
From the 6th April 2023, there will be an increase in the Annual allowance for pension contributions from £40,000 per tax year to £60,000 per tax year. This means individuals can contribute up to £60,000 per year from their gross income without incurring a tax charge. There are to be some adjustments to the income thresholds, with the minimum annual allowance increased to £10,000 and the adjusted income threshold to be increased to £260,000.
Money Purchase Annual Allowance
The money purchase annual allowance applies an income tax charge to excess pension contributions within a tax year. The Chancellor announced that as of 6th April 2023, the money purchase annual allowance will be increased from £4,000 to £10,000.
Currently, the lifetime allowance is set at £1,073,100 and was expected to remain so until 2026. However, in this recent announcement, the chancellor has stated that the lifetime allowance will be removed entirely from 6th April 2023.
Changes to Capital Gains Tax
Separating spouses and civil partners have been given more time to transfer assets between themselves without incurring a possible Capital Gains Tax (CGT) charge. The proposed revisions include the following measures:
- Extended Time for Transfers (up to three years after separation)
- No Gain/No Loss Treatment for Divorce Agreements
- Private Residence Relief Option
- Equal Tax Treatment for Proceeds
These changes will apply to disposals on or after 6th April 2023.
EMI Scheme Administrative Changes
Starting from April 2023, the Enterprise Management Initiative (EMI) option agreements will no longer need to include details about share restrictions or working time declarations. However, the working time requirements still need to be followed. Moreover, from April 2024, the deadline to notify HMRC of the grant of an EMI option will be extended to 6th July of the following tax year.
Expansion of Free Childcare
The chancellor announced that as of April 2024, all working parents of 2-year-olds will be able to access 15 hours of free childcare per week. From September 2024, all working parents of children aged 9 months up to 3 years old will also be able to access 15 hours of free childcare per week. And finally, from September 2025, all working parents of children aged 9 months up to 3 years old will be able to access 30 hours of free childcare per week for 38 weeks of the year.
Every government needs to prioritize spending; the UK government is no exception. With several announcements made during the Spring Budget 2023 that are due to affect businesses and private individuals alike, it’s essential to stay up-to-date on these changes so that you can plan accordingly on matters of both personal and business finance.
If you want to learn more about these changes and how they’ll impact you specifically, please get in touch with our expert accountants in Wimbledon.