On 15 March 2023, Chancellor Jeremy Hunt used his first Spring Budget to focus on boosting economic growth in the UK.
The announcement centred around encouraging people back to work and supporting technological innovation and investment in business.
So what do the changes mean for you and your business?
What’s changing for individuals?
Pensions
One of Hunt’s biggest headline announcements was scrapping the pensions lifetime allowance (LTA).
The LTA is the maximum sum you can pay in pension contributions in your lifetime before they are taxed, with the limit previously set at £1,073,000.
Abolishing the cap means individuals will be able to add as much as they want to their pension pot tax-free.
Furthermore, the annual pensions allowance will increase from £40,000 to £60,000, meaning that workers can save more money for retirement each year before their contributions are taxed.
Hunt hopes these measures will reduce the number of taxpayers who need to report and pay pensions tax, removing barriers to work for older people and encouraging them to stay in employment for longer.
Those affected will include a number of senior NHS doctors, many of whom, according to the British Medical Association, were forced to reduce theirworking hours or take early retirement due to “punitive” tax rules.
Expansion of free childcare
The Chancellor also introduced a series of childcare reforms to encourage parents of young children back into the workforce.
At the moment, working parents of children aged three to four are entitled to 15 or 30 hours of childcare a week in England, depending on their income.
The Government plans to expand this to working parents with children over nine months between April 2024 and September 2025.
Hunt also pledged to make “wrap-around” care for school-age children more widely available to allow parents to work longer hours.
Energy support
The Government is extending the energy price guarantee at its current level by an additional three months.
That means that the average household’s energy bills will be capped at £2,500 a year until the end of June 2023. This will rise to £3,000 from 1 July onwards, when the Government expects energy costs to fall significantly.
What’s changing for businesses?
Capital investment
From 1 April 2023 until 31 March 2026, a “full expensing” scheme will replace the annual super-deduction to encourage businesses to invest in plant, machinery and technology.
Companies will be able to deduct 100% of the cost of all qualifying assets from their taxable profits. — an equivalent tax saving of up to 25p for every £1 spent.
Research & Development tax relief
Hunt also introduced a more generous R&D scheme for loss-making SMEs.
R&D-intensive companies that spend more than 40% of their total expenditure on R&D activities will now be able to claim a higher credit rate of 14.5% instead of the standard 10% rate — as was possible before Hunt’s fiscal statement in November last year.
Investment zones
As part of a plan to encourage economic growth in the UK, 12 new investment zones with a focus on key sectors, such as technology and creative industries, will receive up to £80 million worth of Government support over five years.
Tax changes
The corporation tax rate will increase as planned from 1 April 2023.
While smaller companies with small profits under £50,000 will continue to pay the 19% corporation tax rate, companies making £250,000 or more will need to pay a new 25% rate.
Companies making between £50,000 and £250,000 will also pay this new rate, with marginal relief reducing their bill proportionately.
Preparing for the changes
With many of these measures due to take effect from 1 April 2023, it’s important to understand how they’ll affect you.
We can help your business adapt to the changes, as well as offer our budgeting and forecasting services so you can prepare for the year ahead.
As tax experts, we’ll also guide you through the upcoming corporation tax increase and help you save for retirement by making the most of your pension allowance.
Get in touch with us today to find out what the Spring Budget changes will mean for you and your business.