In his first Spring Budget as Chancellor, Jeremy Hunt stood in the House of Commons to deliver a somewhat surprising roster of tax changes and growth plans.
After a strange few months of policy u-turns and cabinet shifting, you might be wondering where things stand now.
Our article will explain the most recent Budget announcements that may affect you and your business.
Personal announcements
One of the most significant announcements in the Spring Budget was the Chancellor’s removal of the lifetime allowance for pension contributions. Whereas before, you could save up to £1,073,100 before incurring a tax charge, it’s now completely uncapped.
Not only will people be able to contribute as much as they want during their lifetime, but the annual tax-free allowance is also rising from £40,000 to £60,000.
According to the Chancellor, these changes aim to encourage higher earners to stay in work for longer: especially senior NHS staff who have been reportedly retiring early due to tax charges.
Once again, the Government also focused on supporting households with rising energy costs. The bill cap of £2,500 has been extended for three months – saving £160 for the average home.
As expected, Hunt will cut the capital gains tax allowance from April 2023 from £12,300 to £6,000. The Government is still planning to halve this again in April 2024 to £3,000.
Business announcements
Hunt warned before the Budget on 15 March that the main focus would be to tackle inflation and promote growth – not cut taxes.
In order to do so, the main corporation tax rate will increase in the new tax year from 19% to 25%, although the Chancellor said this would only affect 10% of companies in the UK. A small profits rate of 19% will also be introduced.
The new rates are as follows:
- 19% small profits rate on profits up to £50,000
- 25% on profits between £50,000 – £250,000 (but with marginal relief)
- 25% on profits over £250,000.
In light of the impending end of the super-deduction, Hunt revealed that the Government will introduce a new full-expensing scheme.
This will allow companies to claim back 100% of qualifying costs in full and immediately from their taxable profits when investing in qualifying plant, machinery and technology. The scheme will run from 1 April 2023 until 31 March 2026, although Hunt hopes to make it permanent “if the Government can responsibly do so.”
Not only will the Government offer reliefs for capital purchases, but it will also be providing grants for investment zones across the UK. There will be twelve zones in total, with eight proposed areas spread across England and at least three of the other four split between Scotland, Wales and Northern Ireland.
If a local authority in England successfully applies for the scheme, they will receive £80 million in support over a five-year period, which they can use for a range of things from infrastructure to tax reliefs.
How will this affect you?
With the constant chopping and changing in Government policy, especially regarding tax thresholds, it’s important to understand where you stand.
We’re on hand to offer you practical advice on the latest Budget announcements and, if they affect you directly, what you can do to ensure you aren’t dramatically impacted.
Get in touch to discuss your taxes.