Spring Budget 2023

Commentary on the main tax provisions.

Summary

There were few surprises in the Budget, especially given that, contrary to tradition, most of the announcements were extensively trailed in the media in the days leading up to the speech.

The key provisions were as follows.

Corporation tax

It was confirmed that the main corporation tax rate will increase from 19% to 25% with effect from 1 April 2023.

Capital allowances

The 130% capital allowances "super-deduction" for companies ends on 31 March 2023, and will be replaced by a "full expensing" deduction for qualifying capital expenditure – effectively a 100% first year allowance.

Assets which only qualify for capital allowances at the "special rate" do not qualify for the super-deduction and will also be excluded from full expensing. They will receive a 50% first year allowance instead.

Research and Development

A number of changes were announced and we will issue a separate paper about this. In brief:

• Payable credit rate for "R&D intensive" SMEs increased to 14.5% from 1 April 2023
• Merging of SME and RDEC schemes still being considered
• Restrictions on some overseas expenditure deferred until 1 April 2024

EMI share schemes

Some of the rules on granting of options are being simplified; requirement to notify grant within 92 days to be dropped from April 2024; notification will instead be required by 6 July following end of tax year, presumably by being included in the annual declaration instead. This is key as if options are not notified they will not qualify for EMI treatment.

Pension thresholds

The biggest announcement and of tremendous potential value to the relatively small number of people affected.

From 6 April 2023:

• Annual allowance – the maximum annual pension contribution to qualify for tax relief – will increase for £40,000 to £60,000
• The Tapered Annual Allowance minimum will increase from £4,000 to £10,000
• The income threshold for restricting the annual allowance will increase from £240,000 to £260,000
• Money Purchase Annual Allowance (the maximum contribution allowed once you have accessed your pension funds) will increase from £4,000 to £10,000
• The Lifetime Allowance charge – a 55% tax charge on pension pots exceeding a stipulated maximum, currently £1,073,100 - will be scrapped altogether
• The maximum tax free lump sum will be fixed at £268,275

This is presented as aimed primarily at senior NHS consultants, to encourage them to stay in work and help reduce waiting lists.

However it is also a massive opportunity for other high earners, and those with substantial pension pots, to add to their pension funds, creating a tax efficient savings vehicle with great possibilities for inheritance tax savings.

This is likely to be short lived, as Labour have already pledged to reverse the changes if elected.

If you would like to discuss any of the above please call your usual contact at Corrigan or email pete.edwards@corrigan.co.uk.