Insight: UK Chancellor’s 2023 spring budget

Chancellor Jeremy Hunt went one better than 4 of his 5 predecessors today in that he delivered a Budget. Consilium Tax partner Craig Coyle offers up a snapshot of the key announcements featured in the UK Chancellor’s 2023 spring budget.

Against a backdrop of high inflation and interest rate dilemmas, the number of tax measures included in the spring budget was relatively limited. However, there were some important changes for individuals and business owners to be aware of.

Spring budget: goodbye super deductions; hello full expensing

On business taxes, the increase in the top rate of corporation tax from 19% to 25% from April 2023 – which has been on and off more times than a light switch – is confirmed to be going ahead. With the super-deduction scheme expiring at the end of March 2023, the replacement to encourage investment is Full Expensing, which is effectively a 100% allowance for qualifying expenditure for the next 3 years, with a view to making it permanent thereafter.

Consilium Chartered Accountants assess the UK Chancellor's Spring Budget statement announced 15 March 2023. Image is of a Bank of England bank note featuring Queen Elizabeth the second.

Given the Annual Investment Allowance was already set at £1m and this covered 99% of companies, the number of beneficiaries from this will be small but this is clearly very good news for those spending more than that amount on plant annually. The allowance is available to limited companies only. Excluded expenditures from the 100% allowance will include cars, second-hand assets or assets acquired for leasing. The latter two will still be eligible for the Annual Investment Allowance. There will be balancing charges on the sale of any assets on which full expensing is claimed. Similarly, there will be a 50% allowance for expenditure on special rate assets including long-life assets for the same period.

Spring budget offers some redress for reduced SME R&D rates

On R&D, there is additional relief for loss-making SMEs claiming R&D where 40% or more of the company’s total expenditure is qualifying R&D expenditure. The repayable credit will be set at 27p in the pound rather than 18.6p. This is designed to compensate for the reduction in SME R&D rates from April 2023 but will only apply to the most R&D-intensive companies. It seems likely the large company and SME scheme will otherwise merge from April 2024.

Pension changes for individuals

For individuals, the main change relates to pensions and the increase in the Annual Allowance from £40,000 to £60,000, as well as the abolition of the Lifetime Allowance. However, the amount which can initially be drawn tax-free from a pension will be frozen at £268,675.

As with every Budget day release, we are legally obliged to say the devil is in the detail and that we will deliver our more considered thoughts once we have waded through the various minutiae.

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