The Spring Statement from Chancellor Jeremy Hunt was a hefty one but with no real shock announcements.
Many of the measures discussed had already been mooted in autumn but the Chancellor said the budget is aimed at boosting growth, reducing debt and halving inflation.
Head of Taxation at Beatons, Andrew Diver, highlights some of the main points affecting businesses and households.
The government confirmed that the £2,500 Energy Price Guarantee will be extended by three months to June 30, before increasing to £3,000 until the end of the EPG period on March 31, 2024. This extra three months will be worth £160 for a typical household.
A new scheme for businesses, charities and the public sector was also confirmed. The Business Energy Bills Discount Scheme will run until March 31, 2024, giving non-domestic customers discounts on their gas and electricity bills.
As part of a bid to help get people back to work and boost growth, a £4billion expansion of free childcare for one and two year olds in England was announced. Parents will receive 30 hours a week in an increase to funding by £288million by 2024/25.
The personal allowance and basic rate band threshold have been frozen until April 5, 2028.
The personal allowance continues to be partially and then fully withdrawn for higher earners, with £1 of personal allowance lost for every £2 of adjusted net income over £100,000.
Capital Gains Tax
Last autumn, the Chancellor announced that the £12,300 annual tax-free capital gains tax exemption (or allowance) will be reduced to just £6,000 in 2023/24 and only £3,000 in 2024/25. And the change was confirmed this spring.
Pension tax relief
Changes to personal pension plan rules were widely welcomed. The current pension lifetime allowance (LTA) charge is being abolished from April 6, 2023.
The Annual Allowance (AA) also increases from £40,000 to £60,000 from April 6, 2023. The AA applies to the combined pension input by the individual and their employer. Pension contributions higher than the AA result in a tax charge on the individual, although they may take advantage of unused AA amounts from the three previous tax years.
There is a tapering rule for those with high incomes. From April 6, where a taxpayer’s adjusted income exceeds £260,000, the AA is tapered by £1 for every £2 in excess of £260,000, down to a minimum of £10,000 (increasing from £4,000).
VAT registration continues to be set at £85,000 with deregistration fixed at £83,000, instead of yearly inflation increases. This will remain the case until March 2026.
All New Investment Zones
The Government announced that it will establish 12 Investment Zones across the UK, with zones in England, Scotland, Northern Ireland and Wales.
Each successful zone will have access to £80m funding over five years and benefit from a package of tax relief.
Start-up investment schemes
The government is increasing the amount and availability of the Seed Enterprise Investment Scheme for start-up companies.
Under the scheme investment amounts will increase from £150,000 to £250,000. The gross asset limit will be increased from £200,000 to £350,000 and the investment must be made within three years of trade commencing. In a bid to support these changes, the annual investor limit will be doubled to £200,000.
Expenditure on plant and machinery
The Annual Investment Allowance is now set at £1m. This gives 100% tax relief to unincorporated businesses and companies investing in qualifying plant and machinery.
However, it should be noted that the super-deduction, which gives enhanced 130% relief for new qualifying plant and machinery acquired by companies, will end on March 31.
It will be replaced by an initiative called a First Year Allowance which means items can be fully expensed. It will be available to companies buying new qualifying plant and machinery between April 1, 2023, and March 31, 2026. The qualifying criteria is broad although there are exclusions, which should be checked and more information can be found here.
There is a separate 100% FYA for electric vehicle charge points and this remains available for unincorporated businesses and companies until Spring 2025.
NICs for the self-employed
For 2023/24, Class 2 NICs are calculated at £3.45 per week and Class 4 NICs are calculated at 9% on profits between £12,570 and £50,750, and at 2% on profits over £50,750.
MTD for income tax
It was confirmed that Making Tax Digital for Income Tax will not be phased in until April 2026 when businesses will be required to keep digital records and send a quarterly summary of income and expenses to HMRC using compatible software.
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