After a series of mini-budgets and statements in the second half of 2022 we have now had the first full Budget from our new Chancellor of the Exchequer, Jeremy Hunt. The Chancellor sought to address two main barriers that stop businesses from growing; investment incentives and labour supply. Below we have summarised the key measures announced on 15th March 2023 by The Chancellor.
Corporation tax
As promised, the rate at which companies pay corporation tax will go up to 25% from 1st April 2023 if profits are over £250,000. Profits below £50,000 will continue to be taxed at 19% with a marginal rate of tax being applied on profits in between these two thresholds.
These thresholds are adjusted if a company is ‘associated’ with another company. We will get in touch with all clients this may affect to explain further.
‘Full expensing’ deductions
The Chancellor has stated he will replace the Super-deduction allowance, which ceases on 31st March 2023, with a new ‘Full Expensing’ deduction from 1st April 2023 until 31st March 2026. This relief allows a 100% deduction against profits on qualifying main-rate plant and machinery expenditure with no upper limit. However, with the Annual Investment Allowance (AIA) confirmed to remain at £1m it is likely that many small businesses will not need to make use of ‘Full Expensing’.
Pension contribution thresholds
In an effort to encourage over 50s back into work the Chancellor has removed the Lifetime Allowance (LTA) limit for pension savings from 6th April 2023. The LTA was previously just over £1m with any contributions over this amount being subject to a tax charge.
There will also be an increase to the Annual Allowance meaning that an individual can make pension contributions of up to £60,000 per annum from 6th April 2023 rising from the previous amount of £40,000 per annum. This is subject to an increased annual adjusted income limit of £260,000, previously £240,000, whereafter the annual allowance is tapered down to a minimum amount of £10,000 per annum (previously £4,000).
Childcare provisions
Working parents of 3 and 4 year-olds are currently able to claim 30 hours of free childcare per week during term time subject to neither parent earning in excess of £100,000 per annum. From April 2024 working parents of 2 year-olds will also be able to access 15 hours of free childcare per week with this being extended to working parents of 9 month to 2 year-olds from September 2024. From September 2025 all eligible working parents of 9 month to 4 year-olds will be able to access 30 hours of free childcare per week.
For a summary of the upcoming changes to income tax, national insurance, capital gains tax and other tax rates/allowances from 6th April 2023, please see our summary of the Autumn Statement which can be found here.
Whilst we take care to ensure the accuracy of this document, no responsibility for loss incurred by any person acting or refraining from action as a result of this information can be accepted by the firm.
