In his first spring budget speech as Chancellor, Jeremy Hunt delivered a host of changes to the House of Commons on March 15 2023.
While this may seem like a distant memory, it’s worth noting that we’re still facing many of the same issues that served as a backdrop to the speech: a floundering economy and a cost of living crisis.
The Chancellor’s speech focused on economic growth to help the UK recover from the Covid recession and following lacklustre performance.
So what do the changes mean for me? In this blog, we’ll cover all the important announcements and what it means for your finances.
The super deduction ended on the 31st of March — to continue support, the Chancellor unveiled his new form of capital allowances, dubbed full expensing.
Since April, full expensing allows companies to claim back 100% of their expenditure on new, main-rate plant and machinery investments in the same accounting period the purchase was made.
Any company that does so can reclaim 25p for £1 spent on eligible investments to lower their corporation tax bill.
This scheme will last until 31 March 2026 — Hunt is still deciding whether to make it permanent, with guidance to follow.
The corporation tax hike was announced before the sprint budget, with a planned increase of 19% to 25% for companies with profits over £50,000. Below this, you’ll continue to pay 19%; this is now known as the small profits rate.
If you have profits between £50,000 and £250,000, you can apply for marginal relief, which will reduce your corporation tax proportionately.
You can’t claim marginal relief if:
- you’re a non-UK resident company
- you’re a close investment holding company
- your profits (including distributions from unrelated, unassociated companies) are over £250,000.
Research and development
If you’re making a loss but still undertaking some form of research, you’re now better supported through the R&D development scheme.
Hunt announced in November 2022 that SME tax credits would drop from 14.5% to 10%, but this is now no longer the case — but only if you spend more than 40% of your expenses on R&D-led activities. This equates to £27 for every £100 spent.
More reforms are expected to be published for existing audiovisual tax reliefs, turning them into expenditure credits. This will work similarly to the R&D expenditure credit system and offer a higher relief rate.
Pension lifetime allowance
With a view to keeping more people in work for longer, the Chancellor announced the abolition of the pension lifetime allowance.
Workers can now save as much as they wish during their working life, tax-free, removing the previous cap of £1,073,000.
Additionally, Hunt increased the annual allowance from £40,000 to £60,000, allowing taxpayers to claim pension tax relief on an additional £20,000 a year.
Hunt stated this measure will “stop over 80% of NHS doctors from receiving a tax charge” and continued:
“[The reform will] incentivise our most experienced and productive workers to stay in work for longer.”
Speak to us about the changes
As we near the end of Q2 of 2023, the effects of the Spring Budget are still being assessed. These changes are critical to the success of your business, so by staying on top of them, you’re giving yourself the best chance to make the most out of each scheme.
As your adviser, we’re ready to discuss how Hunt’s statement will affect your business. We’re always here for a chat.
Want to talk about these changes in relation to your business? Get in touch with us today.