Budget 2023 - A brief overview

Jeremy Hunt delivered his Budget today (15th March), continuing to tread a cautious path in trying to balance stimulating growth with fiscal discipline.

He attempted to allay fears of reduced growth arising from a raise in Corporation Tax rates by introducing specific generous tax savings for companies undertaking activities that might boost productivity and innovation. Specific targeted measures rather than broad brush changes were very much the theme of his speech.

Measures announced in the Budget 2023

Corporation Tax

As previously announced, the Corporation Tax rate will increase from 19% to 25% from 1 April 2023. Businesses with profits exceeding £250,000 will bear the full brunt of this increase whilst those with profits between £50,000 and £250,000 will suffer a marginal rate.

The impact of this is mitigated for certain businesses by other measures announced and summarised below.

Capital allowances

With the “super-deduction” rates of first-year capital allowances coming to an end on 31 March, they will be replaced by first-year allowances on eligible expenditure of 100% (or 50% for “special rate” expenditure).

Similar to the existing enhanced rates, if assets are sold the disposal proceeds will be brought into charge rather than simply being taken off the carried forward pool value. These allowances are to be available for three years, but with the stated intention to make them permanent.

Research & Development (R&D)

An enhanced payable credit of 14.5% will be available for R&D-intensive, loss-making companies where their eligible expenditure represents at least 40% of their total expenditure. This is instead of the 10% rate for SMEs claiming under the existing scheme. The finer detail will be published for consultation in Summer of 2023.

The decision to restrict some overseas R&D expenditure will now come into effect from 1 April 2024 and not 2023 as previously announced. This is to allow the government to consider the interaction of this and the potential merged R&D schemes, which have just been consulted on.

R&D claims submitted on or after 1 August 2023 will require digital submission using the “additional information” form on the Gov.uk HMRC portal. Previously this was due to take effect for companies with accounting periods beginning on or after 1 April 2023.

Investment zones

Investment zones are to be established in 12 areas around the UK, including within the South Yorkshire MCA area. They will give businesses reliefs from SDLT and National Insurance, as well as enhanced capital allowances and structures and buildings allowances.

VAT

VAT will not be chargeable on deposits payable under the drinks deposit return schemes that are intended to be introduced.

Creative industry reliefs

The rates of tax relief for theatrical productions, orchestras and museum and gallery exhibitions that were due to be reduced will be maintained at their current levels for a further two years, although the reliefs will be restricted to the UK from April 2024.

Charity tax reliefs

Charity tax reliefs will now only be available for UK charities and CASCs (Community amateur sports clubs).

Trust tax simplifications

Reliefs will be introduced from 1 April 2024 to avoid trusts with low levels of income being liable for tax.

Pensions

In a bid to lure over 50s back to work and to prevent doctors from retiring early, the lifetime allowance (the amount that workers can put into their pension pots before they are taxed) is abolished.

The maximum lump sum that can be taken is currently 25% of the value of the pot, and a cap will be introduced to limit this to £268,275 (i.e. 25% of the current lifetime allowance). The annual pension contribution limit will also be increased to £60k, up from £40k.