UK Spring Budget 2023: Top key announcements

Banner Image- UK budget 2023: Top key announcements
The Spring Budget Statement for 2023 builds on the stability created by last year’s announcements. It focuses on working towards achieving three of the five pledges made by UK Prime Minister Rishi Sunak: halving inflation, reducing debt, and growing the economy.
The government aims to influence society through tax and financial systems, particularly by getting people into work and growing the workforce.
However, despite better-than-expected economic performance and tax receipts, Chancellor Jeremy Hunt did not direct any money towards cutting previously announced increases in Corporation Tax, disappointing businesses. Let us study the critical points announced in the UK budget 2023:

1. VAT

The VAT registration threshold remains frozen at £85,000 turnover until 31 March 2026. However, this threshold is subject to fiscal drag, which means that increasing turnover could result in the total turnover being subject to VAT. This could be particularly challenging for businesses operating in a B2C model experiencing inflationary cost increases.

2. Income Tax

Basic rate taxpayers will not experience any reduction in their Income Tax, which will remain at 20% for non-savings and non-dividend earnings between £12,570 and £50,270.

On the other hand, higher earners who currently pay a tax rate of 45% on earnings over £150,000 will see a decrease to £125,140, which implies that some taxpayers who pay 40% will pay an additional 5p in the £.

3. R&D tax relief

The tax breaks available for R&D are being restricted to prevent abuse, with the cash credit reduced from 14.5% to 10% for loss-making businesses. At the same time, larger companies and some SMEs will receive increased payments under a separate scheme.

4. Corporation Tax

The Corporation Tax rise, previously announced, will increase from a universal 19% rate to a tapered rate starting at 19% for profits up to £50,000 rising to a peak of 25% for businesses with profits over £250,000. This kicks in from April 2023.

5. Business Rates

There will be a freeze on Business Rates for 2023-24. Additionally, eligible retail, hospitality, and leisure businesses will receive increased support of 75% business rates relief, up to £110,000 per business, instead of the previous 50%.

6. Inheritance Tax

The Inheritance Tax threshold of £325,000 will remain frozen until 2027-28, along with the additional £175,000 potentially available for passing on main residences.

7. Super Deduction

The “Super Deduction” of 130% for companies investing in new equipment will cease on 31 March 2023, returning to the pre-pandemic rate of 100% of the cost of plant and equipment instead.

8. Dividend Allowance

The Dividend Allowance will be reduced from £2,000 to £1,000 in April 2023 and  to £500 in April 2024. The tax rate on dividends will remain the same as before:
  • Basic Rate dividends will be taxed at 8.75% (if the total earnings are less than £50,270)
  • Higher rate dividends will be taxed at 33.75% (if the total earnings are between £50,270 – £125,140)
  • Additional rate dividends will be taxed at 39.35% (if the total earnings exceed £125,140).

These taxes will be applied to the shareholder after the company has paid Corporation Tax on its activities.

9. National Insurance (NI)

NI rates for both employees and employers will not experience any actual increases, but the thresholds will remain frozen until 2027-28. This could lead to an increase in stealth tax if wages or salaries increase as more people are pulled into higher tax bands.
Additionally, the Employer NI threshold will be frozen at £9,100, which could impact owner-director companies that set their payroll salaries based on this rate. Companies with two or more employees on the payroll can still benefit from the £5,000 employer NI allowance.

Similarly, Self-Employed NI rates will remain frozen, with a rate of 9% on profits above the lower threshold (up to £50,270).

10. Capital Gains Tax (CGT)

The annual exemption, which is the amount of gains that can be made in a tax year without incurring tax, will be reduced from £12,300 to £6,000 from April 2023 and to £3,000 from April 2024. This will particularly impact those selling investments and second homes.

11. Stamp Duty Land Tax (SDLT)

As of 23 September 2022, the threshold for paying SDLT on purchasing residential properties in England and Northern Ireland was increased from £125,000 to £250,000.
Furthermore, first-time buyers will benefit from an increased threshold, with the point at which they begin to pay SDLT now set at £425,000, up from £300,000.

The maximum value of a property on which first-time buyers can claim relief has also been increased to £625,000. These measures will remain in place until April 2025.

12. Annual investment allowance

A previously temporary uplift in tax allowances on plant, machinery and equipment, which allowed 100% of the cost to be offset against taxable profits in the year of purchase, is being retained at £1 million permanently.

Over to you
If you have any questions or apprehensions regarding the recent budget announcements or require professional guidance in reviewing and assessing your business or personal tax status, our team is here to assist you.
We understand that the tax system can be complicated and overwhelming, and it is crucial to have a reliable source of information and guidance to ensure compliance and avoid any penalties or fines.
Our experienced professionals can provide expert advice tailored to your specific needs and help you navigate the complexities of the tax system. Do not hesitate to reach out to us for any support or assistance you may need.
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