In March 2023, Chancellor Jeremy Hunt took to the House of Commons to deliver his first Spring Budget.
He gave forewarning before the Budget that tax cuts would be off the table, with the focus remaining solely on economic growth.
Now that we’re in the 2023/24 tax year, many of his announcements are already in effect. This article will explain the most significant changes and how they may affect you.
Pension lifetime allowance
Perhaps the biggest announcement from the March Budget was Hunt’s abolition of the pensions lifetime allowance (LTA).
The LTA works as a cap for your pension contributions over your lifetime. Previously it stood at £1,073,000, but now people can save as much as they like, completely tax-free.
Also, the annual contribution allowance increased from £40,000 to £60,000, meaning you can save this much without getting taxed yearly.
Hunt says these measures will hopefully prevent people from leaving the workforce as early as possible, with emphasis on the healthcare industry.
Now that the super-deduction has ended (as of 31 March 2023), the Chancellor has given companies a new capital allowance to support investment.
Full expensing, which will be available until 31 March 2026, allows companies who invest in plant, machinery and technology to reclaim 100% of their expenditure in the same year of purchase.
Companies can use full expensing to deduct their costs from their taxable profits, an equivalent tax saving of 25p for every pound spent.
Research and development
Loss-making SMEs will also benefit from the Spring Budget after changes to the R&D scheme.
Companies that spend over 40% of their total expenditure on R&D activities can claim a higher tax credit of 14.5%. Previously this would’ve been 10%, as announced in November 2022.
This means any R&D-intensive loss-making company can claim £27 for every £100 they spend.
Corporation tax has now risen from 19% to 25% for companies with certain annual profits.
Smaller companies with profits under £50,000 will continue to pay 19% (now known as the small profits rate). Companies making over £250,000 will pay the main rate of 25%.
If your company has profits between £50,000 and £250,000, you’ll pay the 25% rate but could receive marginal relief, reducing your corporation tax proportionately.
Hunt also extended the energy price guarantee by three months in a bid to ease pressure on families facing high utility bills. The cap currently caps an average household’s annual energy bills at £2,500.
This was due to rise to £3,000 in April, but the same levels of support will now continue until the end of June when energy bills are set to fall.
Keep track of your responsibilities
It is vital to keep up with the latest announcements because the Government releases budgets twice a year.
Whether it’s changing personal allowances or higher business tax rates, you’ll need to be in the know to meet your obligations to HMRC.
As a friendly and experienced team of tax specialists, we’re always happy to discuss any changes and help you stay financially sound. Get in touch to find out how.