Spring Budget 2023

Today’s announcements from Jeremy Hunt did not include the sometimes traditional tax bombshells we have got used to in recent years.

The aim of the Government is to present a show of stability and keep the markets happy. So it isn’t surprising that a Budget presented by the fourth Chancellor this tax year (so far!) didn’t include any last-minute rate changes or threshold moves.

As a result, the majority of the news for Contractors and SMEs is contained in this earlier post about the Autumn Statement, which includes detailed information about most types of tax and allowance.

So where are we, after the combination of the Autumn Statement and today’s Budget?

Companies – SMEs and contractors/freelancers with their own business

The planned increase in corporation tax (“CT”), which takes the headline rate to 25%, is going ahead from 1 April 2023 as planned. The biggest companies will pay 25%, while smaller companies will experience a rate of CT of 19% up to £50k of profits, and then 26.5% until £250k of profits is reached. If more than one company is controlled by the same person or persons, the thresholds are lower. No company will pay more than 25% overall, but the 26.5% rate will feel painful to growing businesses, suffering around a 40% increase in their company tax bill compared to today.

Partly to compensate for the increase in CT, the Chancellor today announced improved allowances for those investing in plant and machinery and equipment like IT. For the next three years, all capital expenditure can be relieved against profits in the year of purchase. A move like this was expected, as the improved super-deduction relief was due to end on 1 April, and big business will view this positively, assuming they plan to invest.

Off-payroll working and IR35

There are no changes to the rules in this area. The old Chapter 8, or the new Chapter 10 rules apply next year as they do today.

Pensions

Driven by the situation faced by many higher-paid workers in the medical profession, the annual investment limit for pensions is increasing from £40k per annum to £60k per annum. The annual lifetime limit will be abolished. This may allow more use of pension contributions as a tax-efficient planning point for small businesses.

Income tax and National Insurance

Broadly, the rates and thresholds have mainly been frozen, so the personal allowance for example at £12,570 currently stays the same for the 23/24 tax year.
The additional rate income tax band which currently starts at £150k, will start at £125,140 from 6 April 2023.

Other personal taxes

The tax-free allowances for dividends, capital allowances and savings income are all reduced for the 23/24 tax year and is likely to reduce again the following year. The rates of tax applied are not changing.

Other measures

The Government also announced measures aimed to continue to help households with high energy costs, and a range of measures intended to help people back to work who are currently ‘inactive’ in the jobs market. New investment zones are to be launched, and gradual increases in the amount of subsidised childcare are planned over the coming years.

Got a question?

If you have any questions about the Spring Budget and how it affects you, please get in touch with a member of our accountancy team on 01923 257257