Earlier today, the Chancellor, Jeremy Hunt delivered his Spring Budget Statement with the Governments main focus being on ‘back to work’ initiatives and growing the economy.

There were no substantial changes to the announcements that were made in the Autumn Statement of 17 November 2022. However, there were several tax announcements which will impact businesses.

Confirmation of Corporation Tax Increase

From 1 April 2023, as previously confirmed, the planned increase in the headline rate of Corporation Tax to 25% for companies with over £250,000 in profits will go ahead. 

A small profits rate of 19% will apply to profits of £50,000 or less. 

Profits between £50,000 and £250,000 will be taxed at the main rate of 25% but marginal relief will apply.

Due to bringing in these new rates of tax, the old associated company rules are now brought back into focus. Essentially, these rules operate by reducing the thresholds referred to above by reference to the number of companies that are associated with each other.

Capital Allowances

A new scheme replacing the temporary ‘super deduction’ scheme was announced and will be effective from 1 April 2023. This is referred to as ‘full expensing’ and will permit a deduction of 100% of qualifying plant and machinery to be deducted from taxable profits. Unlike historic accelerated capital allowance schemes, there appears to be no upper limit on qualifying expenditure.

This scheme will run alongside the existing Annual Investment Allowance which has a limit of £1 Million. 

Reforms to Research & Development (R&D) tax reliefs

An additional R&D tax credit is being introduced from 1 April 2023 to what are described as ‘R&D intensive, loss making companies’ whereby a claim of £27 for every £100 investment can be made.

R&D intensive companies are those where qualifying R&D expenditure is worth 40% or more of its total expenditure.

 

Pensions

As widely reported in the media prior to today’s announcement, the following changes to pensions were confirmed:

• The £40,000 annual cap on pension contributions was increased to £60,000.
• The lifetime limit on pension fund values was abolished.
• For those individuals who have flexibly accessed a defined contribution pension scheme, the annual limit for further investment was raised from £4,000 to £10,000.

National Living Wage / Minimum Wage

Whilst writing, we would remind you of the new National Living Wage and Minimum Wage from 1 April 2023:

	New Rate (From April 2023)	Current Rate (Since April 2022)	Percentage Increase
23 years old and over	£10.42	£9.50	9.7%
21-22 years old	£10.18	£9.18	10.9%
18-20 years old	£7.49	£6.83	9.7%
16-17 years old	£5.28	£4.81	9.7%
Apprentice Rate*	£5.28	£4.81	9.7%

*This rate is for apprentices under 19 or those in their first year. If the apprentice is 19 or over and past their first year, they will be entitled to the rate that applies to their age

 

As we have always maintained, with all matters referred to in the Chancellor’s announcements the “devil will be in the detail” and the full impact and understanding of all the announcements will not be made clear until the full parliamentary process has been undertaken and the proposals become law in the relevant finance act. 

Last modified on Wednesday, 15 March 2023