On March 15th, 2023, the Chancellor, Jeremy Hunt, announced several changes during the annual spring budget. A good portion of the announcements focused on childcare, but I will be looking at the announcements that will affect businesses in the UK.
- All tax rates and allowances that were announced during the Autumn 2022 Budget have been confirmed and will stay the same.
Personal Tax Rates:
– basic rate of income tax for those in England, Wales and NI will remain at 20%
– 45% higher tax rate will remain
National Insurance Contributions will be paid by those who earn £12,570 or more
Corporation Tax on profits of over £250,000 will increase from 19% to 25% with a marginal rate of 26.5% on profits between £50,000 and £250,000. - From April 1st, 2023 until March 31st, 2026, companies that buy new and unused plant and machinery will no longer use the “super-deduction” method announced in March 2021. Instead, they will be able to claim 100% first-year allowance referred to as “full expensing”. They will be able to claim 50% first-year allowance for special rate expenditure.
- The 100% Annual Investment Allowance that is available to all businesses that buy assets have been confirmed at £1 million/year permanently.
- The dividend allowance that exempts some dividend income from tax is being reduced from £2,000 to £1,000 in 2023/24 and then to £500 in 2024/25.
- Increase in National Living Wage for those aged 23 and over to £10.42/hour from April 1st, 2023.
- Capital Gains Tax – the annual exempt amount is being cut from £12,300 to £6,000 in 2023/24 and then to £3,000 in 2024/25. This reduction will mean more individuals will be required to file self-assessments due to needing to report chargeable gains.
- The changes to Research and Development announced during the Autumn 2022 Budget will be included in the Spring Finance Bill 2023.
Additional R&D Tax relief will be made available for R&D intensive SMEs that are eligible and these will take effect from April 1st, 2023. - VAT – to help the NHS, from May 1st, 2023, health care services provided by staff that are directly supervised by registered pharmacies will be VAT exempt. In Autumn 2023, zero-rate VAT will be extended to medications supplied via prescriptions through Patient Group Directories.
- Investment Zones – The government will establish 12 investment zones across the UK. Each area will have to submit proposals and once approved the zone will be established. Each zone will be able to access special funding worth up to £80 million over a 5-year period.
- The government will be looking at the tax system for small businesses and implementing a number of changes to make it easier.
This blog post only touches on some of the main highlights from the Spring Budget. You can read the full budget in full on the HMRC website here.