Jeremy Hunt has used his Budget Statement to set out a number of measures with the aim of improving the country’s growth.
The Chancellor has built on his Autumn Statement and the majority of the changes announced at that time will still come in as planned from April. Please see our Autumn Statement release which covers changes to Income Tax, Business Tax, Stamp Duty Land Tax and Electric Cars.
Support for Energy Costs
The Energy Price Guarantee for households is to be extended from April for 3 months with the same cap and then from 1st July it will continue for 9 months but with an increased cap with the typical bill increasing from £2,500 per annum to £3,000 per annum.
The Chancellor has announced a number of steps to support growth.
Income Tax and Capital Gains Tax
In the Autumn Statement the personal allowances were frozen and the rates of Income Tax, National Insurance and Value Added Tax remained unchanged. However, the point at which the Additional Rate of Tax starts was reduced from £150,000 to £125,140 from 6 April 2023.
The dividend allowance, which currently allows for the first £2,000 of dividends to be tax free is to reduce to £1,000 from 6 April 2023 and £500 from 6 April 2024 increasing the tax burden on entrepreneurs and investors.
The annual exemption for capital gains tax is to be reduced from £12,300 to £6,000 from 6 April 2023 and to £3,000 from 6 April 2024.
The tax free annual contribution to a pension has been increased from £40,000 to £60,000 and the Life Time Allowance Restriction has been abolished, meaning that higher pension contributors may be able to increase their retirement provision and should discuss this with their IFA.
In addition, for those returning to work who have previously flexibly drawn down on their pension they can make annual contributions to top up their pensions of £10,000 per annum from April 2023.
The chancellor confirmed that Corporation Tax will increase to 25% from 1 April 2023 for companies/groups with profits over £250,000.
The Annual Investment Allowance will be set at a permanent level of £1,000,000 from 1 April 2023, meaning that the majority of capital expenditure on plant and machinery can be fully relieved in the year of acquisition. However, the Chancellor has introduced for companies a new 100% First Year Allowance that will apply from 1 April 2023 to 31 March 2026 on new unused IT equipment, plant and machinery and a new 50% first year allowance for new and unused longer life assets and fixtures. Hence, companies who exceed the £1m spend should still be able to claim a full deduction for the cost of qualifying new assets. For the avoidance of doubt these Allowances do not apply to cars.
The Chancellor has previously announced a reduction in the R&D deduction rate under the SME regime from 130% to 86% and the repayable tax credit has been reduced to 10%, which will impact many innovative SMEs that the Chancellor is keen to encourage. He has however increased the R&D Expenditure Credit for larger businesses from 13% to 20%, which will encourage larger businesses to continue undertaking R&D. These changes are to be effective from 1 April 2023. In addition to this, the Chancellor has announced a new relief for loss making R&D intensive SMEs where over 40% or their expenditure is on qualifying R&D, then these companies will be able to claim £27 from HMRC for every £100 spend on qualifying R&D investment. This new relief will apply from 1 April 2023.
Companies will obviously be adversely affected by the increase in Corporation Tax to 25% and the Annual Investment Allowance and 100% First Year Allowance will hopefully encourage investment.
If you would like to understand how this affects you, please contact us on 0330 088 7111