The Adams Moore Guide to the Spring Budget 2023
The Chancellor announced a budget for growth that pays for our NHS and schools, finds jobs for young people, and provides a safety net for older people all whilst making our country one of the most prosperous in the world.
The Chancellor said the OBR now forecasts the UK will not enter a technical recession this year. But, despite avoiding recession, living standards are still predicted to fall by 6%.
The below is a summary of the main changes in the budget. If you have any questions at all, please do not hesitate to contact us.
From April 2023, the planned increase in the corporation tax rate to 25% for companies with over £250,000 in profits will go ahead. Small companies with profits up to £50,000 will continue to pay corporation tax at 19%.
Companies with profits between £50,000 and £250,000 will pay tax at the main rate reduced by a marginal relief providing a gradual increase in the effective corporation tax rate.
Annual Investment Allowances
Annual Investment Allowance was previously confirmed at a permanent rate of £1m from April 2023.
‘Full expensing’ deduction. In order to replace super-deduction, a new ‘Full Expensing’ deduction is announced from 1 April 2023 until 31 March 2026. The relief allows companies to claim 100% first-year deduction from profit before tax on qualifying new main-rate plant and machinery investments.
Research and development
The rules around R&D tax credits have been significantly tightened and rates reduced.
The lifetime pension allowance charge will be removed from April 2023 before the allowance is abolished entirely from April 2024. The pension annual allowance is increased from £40,000 to £60,000 from April 2023.
Income tax rates and allowances
20% basic rate tax £12,571-£50,270 £12,571-£50,270
40% higher rate tax £50,271-£125,140 £50,271-£150,000
45% additional rate tax Above £125,140 Above £150,000
Personal tax thresholds – i.e. personal allowance, basic and higher-rate thresholds for income tax – are maintained until April 2028 at a current level of £12,570 and £50,270. The additional rate threshold is reduced from £150,000 to £125,140 from 6 April 2023.
Personal allowance for higher rates – 2023/24
Where annual income exceeds £100,000, personal allowance is lost at a rate of £1 for every £2 of income above £100,000. This is the threshold where the entire personal allowance is lost.
The loss of the personal allowance means a person is taxed at 40% on the additional £2 of income, and they also pay an extra 40% on the £1 of personal allowance lost. This results in a marginal rate of 60%, which continues up to £125,140 (£100,000 + (£12,570 x 2)). At the £125,140 point the entire personal allowance has been lost.
The National Insurance thresholds for all classes will be maintained until April 2028 at the current level. The employment allowance is set to the current level of £5,000.
National Living Wage
From 1 April 2023, the National Living Wage is increased to £10.42 an hour, for those aged 23 and over.
Dividend allowance is reduced from £2,000 to £1,000 from April 2023 and to £500 from April 2024. The threshold of £2,000 has been in place since April 2018. From 6 April 2022, dividends are taxed at 8.75% (basic rate), 33.75% (higher rate) and 39.35% (additional rate).
No further changes were announced to the inheritance tax nil-rate band and residence nil-rate band; thresholds are maintained at the current level until April 2028.
Stamp Duty Land Tax (SDLT) cuts for England and Northern Ireland will remain in place until 31 March 2025. From 23 September 2022, the nil-rate threshold of SDLT was increased from £125,000 to £250,000 for all purchasers of residential property in England and Northern Ireland and the nil-rate threshold paid by first-time buyers increased from £300,000 to £425,000.
Help with Childcare
A phased package of support has been announced for help with childcare costs for accessing 30 hours of childcare for children over nine months old. The free childcare will be available for 38 weeks of the year.
Plastic Packaging Tax rate
The government will uprate the Plastic Packaging Tax rate, in line with CPI, from 1 April 2023. The tax came into force on 1 April 2022 and is currently charged at a rate of:
- £200 per tonne from 1 April 2022
- £210.82 per tonne from 1 April 2023