On Wednesday 15th March 2023, Chancellor Jeremy Hunt announced his Spring Budget. Despite post pandemic inflation, ongoing strike action and the cost-of-living crisis, the outlook was somewhat more positive than the Autumn 22 statement with the UK no longer expected to go into recession this year.

While the focus is on encouraging people back into work with changes to pensions and free childcare, there are a few key points we think you should know:

Capital Allowances

The enhanced Capital Allowance period, or ‘super-deduction’ of 130%, ends on 31st March 2023. This is being replaced by ‘full expensing’, whereby for any qualifying capital expenditure from 1st April 2023, you will be able to claim first year allowances of 100%. This measure will initially be introduced for three years and applies to items such as commercial vehicles and IT equipment. Assets that fall into the special rate pool will benefit from the 50% first-year allowance instead.

Sole traders and partnerships do not qualify for the new full expensing but will continue to be able to use the annual investment allowance, now fixed at £1,000,000 per tax year.

Pension changes coming into effect on 6th April 2023:

• Annual Allowance – The annual amount contributed to pensions before tax is due will increase from £40,000 to £60,000.
• Lifetime Allowance – This is the cap on the amount invested into a pension before it incurs tax. Previously set at just over £1.0731 million, this will now be removed with plans to fully abolish the limit in a future bill.
• Tapered Annual Allowance – The adjusted income threshold for this allowance will be increased from £240,000 to £260,000, with the minimum Tapered Annual Allowance increasing from £4,000 to £10,000.

Points revisited from the Autumn Statement 2022 that have now been confirmed:

Income tax 

From 6th April 2023, the additional rate tax band for income tax will be reduced from £150,000 to £125,140. This means that any income between £37,701 and £125,140 will be taxed at 40%, with any additional income being taxed at 45%. Dividends will be taxed at 33.75% and 39.35% respectively.

Corporation Tax

From 1st April 2023, for companies whose taxable profits are over £250,000, the main rate of Corporation Tax they pay will increase from 19% to 25%. Those with profits under £50,000 will remain at 19% and for those with profits between £50,001 and £250,000, the 25% rate will apply however there will be a marginal relief reduction. This means your tax rate will be somewhere in between 19% – 25%, depending on your profit levels.

Dividend Allowance

From 6th April 2023, the amount of dividends you can take before incurring tax will reduce from £2,000 to £1,000.

Capital Gains Allowance

From 6th April 2023, the annual capital gains tax free allowance for 23/24 will reduce from £12,300 to £6,000.