Yesterday, the 15th of March 2023, the Chancellor Jeremy Hunt announced his first full Budget.
One of the key themes was boosting economic growth and while he confirmed the 6% increase in the rate of corporation tax, he also mitigated this by replacing the capital allowances “super-deduction” with full expensing, enabling businesses to claim tax relief on the full cost of certain plant and machinery up-front.
The Government was also committed to tackle cost of living inflation and to allow working parents improved access to childcare provision.
Furthermore, over £100 million have been allocated to support charities and community organisations in England and to help with immediate cost pressures and making facilities more energy efficient.
Please find herewith below a summary of the main tax related announcements:
- Two new first-year allowances (FYAs) for companies incurring qualifying expenditure on new plant and machinery on or after 1 April 2023 but before 1 April 2026
· A 100% FYA for main rate expenditure (full expensing)
· A 50% FYA for special rate expenditure
The expenditure must be incurred by a company and the plant or machinery on which the expenditure is incurred must be new.
- The creation of 12 Investment Zones across the UK, including or connected to special tax sites
Special tax sites will be designated in or connected with these investment zones and offer a package of tax reliefs for a limited time including:
· 100% enhanced capital allowances for incurring qualifying expenditure on new plant and machinery to be used in a special tax site
· Stamp Duty Land Tax Relief relief for properties acquired for a qualifying commercial purpose and used for such a purpose in a control period of up to three years
· Secondary class 1 NICs relief for employers with premises in a designated tax site on the earnings of all new employees who spend 60% or more of their working time on the site, up to £25,000 per year for up to three years
- Additional relief for R&D intensive SMEs
The payable credit rate will be 14.5% and the additional deduction rate will remain at 86% on top of the normal 100% tax deduction for R&D.
- Expansion of the Seed Enterprise Investment Scheme (SEIS)
Legislation will be introduced to increase the following limits for shares issued on or 6 April 2023:
· Issuing company's investment limit: from £150,000 to £250,000
· Gross assets limit: from £200,000 to £350,000
· Age limit: from two to three years
· Investor's annual investment limit: from £100,000 to £200,000
- Abolition of pensions lifetime allowance and increases to annual allowance and money purchase annual allowance
· The annual allowance will increase from £40,000 to £60,000
· The lifetime allowance, currently £1,073,100 will be abolished from the start of the 2023/24 tax year
· For high income individuals the maximum tapered annual allowance will rise from £4,000 to £10,000 and the adjusted income level from which the taper applies will rise from £240,000 to £260,000.
- Starting rate for savings to rise with CPI from 2024-25
The 0% band for the starting rate for savings income is confirmed at its current value of £5,000 for the tax year 2023-24. It will increase it in line with the consumer prices index in the following years.
- Self-assessment: gains from cryptoassets
From the tax year 2024/25 gains related to cryptoassets will have to be separately identified in the self-assessment tax return.
- CGT: extension of "no gain no loss" window on divorce and separation
Legislation will be introduced to relax the capital gains tax rules on transfer of assets between spouses and civil partners who are in the process of separating by giving them up to three years to make no gain/no loss transfers of assets between them when they cease to live together.
Unlimited time will be available if the assets are the subject of a formal divorce agreement. divorce, dissolution of civil partnership and formal separation.
- Election to accelerate taxation of carried interest
Legislation will be introduced to enable individual investment managers to make an election for any carried interest that they expect to receive to be taxed in the UK on an accruals basis.
The election will facilitate claims for relief under double tax treaties by aligning the timing of the UK tax liability with that of other jurisdictions.
We will also like to remind you of the main tax changes previously announced by the Government which will also take place starting from the 2023/24 financial year:
- The threshold for the additional rate of income tax will be lowered from £150,000 to £125,140
- The Dividend Allowance will be reduced from £2,000 to £1,000 from April 2023 and to £500 from April 2024
- The Capital Gains Tax annual exempt amount will be reduced from £12,300 to £6,000 in April 2023, and £3,000 in April 2024
- The main rate of Corporation Tax will increase to 25% for companies with profits in excess of £250,000. Companies with annual profits up to a maximum of £50,000 will still benefit from the 19% small company rate
If you would like to discuss any of these changes please do not hesitate to contact us.
let's work together