Chancellor Jeremy Hunt delivered his first full budget speech to Parliament this month. He believes the
plans outlined in the autumn statement are ‘working’ and that the British economy will avoid recession,
despite previous predictions from analysts back in November.
Most of the key tax rates and allowances were announced in the autumn statement and are unchanged a positive in itself after the instability of last year – so the main focus of the speech was on spending
rather than tax.
We have analysed the announcements and have highlighted below what we believe to be the most key
and relevant points for our clients.
New announcements
Energy Costs – The Energy Price Guarantee has been extended for a further 3 months, keeping
the current cap in place until 1st July 2023.
Pensions – The annual tax-free allowance on pensions has seen a 50% increase from £40k to
£60k. The £1m Lifetime Allowance on pensions has been abolished.
Childcare – The government is planning to significantly expand childcare entitlements for
working parents. These plans will be phased in over the next 2.5 years. By September 2025 the
plan is for working parents of children aged 9 months to 4 years old to receive 30 hours of free
childcare per week. Currently the allowance is only for children aged 3-4 years old and varies
between 15-30 hours based on certain eligibility criteria. There are also plans for all schools to
offer ‘wrap-around care’ for children by September 2026.
Research and Development – The chancellor has promised an enhanced credit for small and
medium sized businesses that spend heavily on R&D. This restores the payable tax credit rate
to the level it was before the recently announced cuts. Whilst this is a welcome development,
SMEs rates are still lower overall than before the recent cuts from the autumn statement.
Fuel Duty – Fuel duty has been frozen for another 12 months.
Alcohol Duty – Duty on draught products in pubs will be 11p lower than that charged to
supermarkets. Good news for our clients in that sector and those of us that like to frequent such
establishments!
AI Research – AI is coming, and we at Baverstocks are very aware of that. The announcement
of the ‘Manchester Prize’ – an annual £1m award for ground-breaking AI research – shows that
the government are keen for the UK to be one of the frontrunners in that area.
Corporation Tax – The tax rate increase from 19% to 25% on profits over £250k is locked in
and will come in to play from 1st April 2023.
- Those with profits under £50,000 will continue to pay the current rate of 19%.
- Those with profits above £250,000 will pay their corporation tax at a rate of 25%.
- Those with profits between £50,000 and £250,000 will pay at a ‘marginal rate’ between
19 and 25%. This is an area we will be monitoring closely with our affected clients. - The Annual Investment Allowance (AIA) for capital allowances is now set at £1m
permanently. This was previously set to return to £200k in March 2023. The 130%
super-deduction, which ends on 31st March 2023, will be replaced by a 100% first year
allowance (uncapped) for qualifying expenditure for 3 years from 1st April 2023.
Income Tax – Rates will remain at 20% for lower rate, 40% for higher rate, and 45% for the
additional rate. The threshold for the additional rate of 45% has been reduced from £150,000
to £125,140 from April 2023. The decision to remove the 1.25% increase in employers national
insurance has been upheld.
Personal tax thresholds – including the new lower threshold for additional rate – will remain
frozen until April 2028. This includes the personal allowance (the amount of income a person
earns before paying tax) which will remain at £12,570. The nil-rate threshold for Inheritance Tax
will also be frozen until April 2028.
Dividends – Recent rises in the tax rates on dividend income will remain in place, with the rates
increasing from 7.5% to 8.75% for lower rate, 32.5% to 33.75% for higher rate, and 38.1% to
39.35% for additional rate. The dividend allowance (the amount of dividends a person can earn
before paying tax) will be reduced from £2,000 to £1,000 from April 2023, with a further
reduction to £500 from April 2024.
CGT – The annual exemption for Capital Gains Tax will be reduced from £12,300 to £6,000
from April 2023, with a further reduction to £3,000 from April 2024.
National Living Wage – The national living wage (NLW) by 9.7% to £10.42 an hour from April
2023, for those aged 23 and over.
Business Rates – The business rates multiplier will be frozen in 2023/24, while relief for 230,000
businesses in retail, hospitality and leisure sectors will be increased from 50% to 75% next year.
Stamp Duty – The nil-rate threshold for stamp duty was doubled from £125,000 to £250,000
for residential properties. For first time buyers the threshold has been increased from £300,000
to £425,000.
*This should not be used as a definitive guide since individual circumstances may vary. Specific advice should be obtained from the team, where necessary.
