Here are the key points of the SPRING BUDGET 2023

Business tax

Corporation tax – The Chancellor confirmed that the main corporation tax rate will increase from 19% to 25 with effect from 1 April 2023.

Capital Allowances – The super-deduction regime will end 31 March 2023, and will be replaced from 1 April 2023 with ‘full expensing’ – 100% capital allowances for qualifying plant and machinery. This will last for three years, to 31 March 2026, although the Government indicated that it is their ambition to make this permanent. The Government will also introduce 50% first year allowances for ‘special rate’ plant and machinery, including long life assets. These rules apply only for corporation tax purposes, and will not be available for businesses which are subject to income tax, unless they are below the Annual Investment Allowance threshold of £1m per annum.

The Government has also confirmed that the 100% first-year allowance for qualifying expenditure on electric vehicle charge-point equipment will be extended until 31 March 2025 for corporation tax, and 5 April 2025 for income tax.

Research & Development – From 1 April 2023, a higher rate of relief for loss-making R&D intensive SMEs will be introduced. SME companies whose qualifying R&D expenditure constitutes at least 40% of their total expenditure will be able to obtain an effective credit of 27p for every £1 of qualifying R&D expenditure.

The Government is still considering the responses to the consultation on merging the RDEC and SME schemes, and no decision has been made. Draft legislation on a potential merged R&D relief scheme will be published for technical consultation in the Summer. In the meantime, the previously announced restriction on the inclusion of some overseas expenditure in R&D tax relief claims is deferred for a year until 1 April 2024, to allow the government to consider the interaction of this with a potential merged R&D relief scheme.

Two new categories of qualifying R&D expenditure will be created, for data licences and cloud computing services.

It has also been announced that all R&D claims filed from 1 August 2023 will need to be filed using the new digital forms, regardless of the accounting period concerned.

Personal Tax

Income tax rates and thresholds – There were no changes to previously-announced personal income tax and National Insurance Contribution thresholds or rates.

Pension tax relief – As part of a range of measures aimed at reducing economic inactivity, significant reforms to pension taxation were announced:

The amount that an individual can contribute tax free to their pension fund is to be raised from £40,000 to £60,000 per annum from April 2023.

The Government will work to abolish the Lifetime Allowance in future Budgets. It currently stands at £1,073,100.

For those who are already drawing down on their pension, the total amount they can save tax free under the Money Purchase Annual Allowance is to be increased from £4,000 to £10,000 from April 2023.

Indirect taxes & Duties

Fuel duty – The government has announced that fuel duty will be frozen and a 5p reduction will be maintained for another year.

Alcohol duty rates and Alcohol duty reform – Duty rates of alcohol will be increased in line with RPI inflation. Draught Relief will increase from 5% to 9.2% for beer and cider draught products and from 20% to 23% for wine, spirits based and other fermented draught products. These changes will take effect from 1 August 2023.