Introduction and Summary
After presenting a Budget-in-all-but name with the Autumn Statement, the Spring Budget was delivered against the backdrop of a day of widespread industrial action. The run-up to the event appeared deliberately downplayed, save for a late flurry of leaks highlighting a focus on childcare at one end of the scale and pensions at the other. While acknowledging the Prime Minister’s two objectives of halving inflation and reducing debt, Mr Hunt focused his Spring Budget on the Prime Minister’s third objective – getting the economy going.
In a wide-ranging speech, there were some key headline items:
The inflation rate is forecast by the Office for Budget Responsibility to fall from 10.1% (January 2023) to just 2.9% by the end of 2023.
The lifetime allowance for pensions will be abolished from April 2024, with the lifetime allowance charge withdrawn from April 2023.
A new monetary limit for the tax-free pension commencement lump sum will be introduced for 2023/24 of £268,275 (equivalent to 25% of the current standard lifetime allowance).
The annual allowance for pensions will increase by 50% to £60,000 from 2023/24 and the money purchase annual allowance will rise from £4,000 to £10,000 from 2023/24.
Companies investing in new plant and machinery in the three years from 1 April 2023 can claim a first-year allowance of up to 100% of expenditure.
Small and medium-sized enterprises that spend 40% or more of their total expenditure on research and development can claim a tax credit worth £27 for every £100 they spend from April 2023.
The energy price guarantee is maintained at the current £2,500 level until the end of June 2023.
Up to 30 hours of free childcare per week will be available to working parents of children from the age of nine months by September 2025. Initially, from April 2024, working parents of two-year-olds will be able to access 15 hours of free childcare per week.
The scheduled 11p a litre duty increases in petrol and diesel will not go ahead.
The Details
Personal Taxation
Income Tax
For 2023/24 to 2027/28, the personal allowance will remain at £12,570 and the higher rate threshold at £50,270, as previously announced. The additional rate threshold for 2023/24 will be reduced to £125,140.
The effect of the reduction of the additional rate threshold from 6 April 2023 will result in those earning above £125,139 having to pay an additional 5p in every £1 of earnings beyond this amount. Earnings of £150,000 will result in additional tax liability of £1,243.
Savings Rate Band
The 0% band for the starting rate for savings income for 2023/24 will remain at £5,000.
Dividend Tax
The dividend allowance will reduce to £1,000 for 2023/24 and to £500 for 2024/25. The rates of tax on dividends above the dividend allowance will remain unchanged.
National insurance contributions (NICs)
The upper earnings limit, upper secondary thresholds and upper profits limit will remain aligned to the unchanged higher rate threshold at £50,270 for 2023/24 to 2027/28, as previously announced. The Class 1 primary threshold of £12,570 and secondary threshold of £9,100 will remain frozen until April 2028. The NIC rates are unchanged.
Company car tax
The company car tax rates for 2023/24 will remain frozen for 2024/25. The rates for electric and ultra-low emission cars will increase by 1% in each of 2025/26, 2026/27 and 2027/28. These will be subject to a maximum percentage of 5% for electric cars and 21% for ultra-low emission cars. The rates for all other bands of vehicles will be increased by 1% for 2025/26 up to a maximum percentage of 37%; they will then be fixed for 2026/27 and 2027/28.
Pensions, Savings and Investments
Lifetime Allowance (LTA)
At an unspecified future date, the LTA will be abolished.
Annual Allowance (AA)
From 6 April 2023 the AA for pension contributions will increase to £60,000.
Individual savings account (ISA) subscription limits
The ISA annual subscription limit for 2023/24 will remain at £20,000 and the corresponding limit for junior ISAs (JISAs) and child trust funds (CTFs) will stay at £9,000.
Capital Taxes
Capital gains tax (CGT) annual exempt amount
The CGT annual exempt amount for individuals and personal representatives will be cut to £6,000 for 2023/24. The annual exempt amount for most trusts will likewise fall to £3,000 (minimum £600), as previously announced. For 2024/25 onwards, the corresponding figures will be £3,000 and £1,500 (minimum £300). The allowance will no longer be index linked.
Inheritance tax (IHT)
The IHT nil rate band will remain at £325,000 from 2023/24 to 2027/28, as previously announced. The residence nil rate band (RNRB) likewise stays at £175,000 and the RNRB taper continues to apply until April 2028 if the value of a deceased person’s estate is greater than £2 million.
Stamp duty land tax (SDLT)
There are no changes to SDLT rates.
Welfare and Family Support
Childcare
From April 2024 working parents of two-year-olds will be able to access 15 hours of free childcare a week in England. From September 2024, this will be extended to working parents of children aged between nine months and two years, and from September 2025, further extended to working parents of children aged between nine months and three years with the hours of access increasing to 30 hours a week.
Business Taxes
Corporation Tax Rates
Main rate (profits over £250,000) of corporation tax increased to 25% with small profit rate (profits up to £50,000) remaining at 19%, with effect from 1 April 2023. This means that the effective rate of Corporation Tax for profits between £50,000 and £250,000 will be 26.5%.
Capital Allowances
Qualifying expenditure from 1 April 2023 will be able to claim 100% first-year allowance.
Research & Development Expenditure (R&D)
From 1 April 2023, a new credit rate (14.5%) will be available for loss-making companies whose R&D expenditure constitutes at least 40% of the total expenditure.
Value Added Tax (VAT)
No changes announced other than services directly supervised by pharmacists being exempt from VAT.
In conclusion
This summary represents some of the announcements (that are relevant to readers) made by the Chancellor, Jeremy Hunt, in his Spring Budget on 15 March 2023.
This summary is for general information only. You are recommended to seek competent professional advice before taking or refraining from taking action on the basis of the contents of this article. The guide represents our understanding of the law and HM Revenue & Customs practice as at 15 March 2023, which may be subject to change.
