[13.03.23]

The story so far is Red Team 23 – Green Team 4

It has been a busy few months for new tax legislation with the chaos that surrounded Kwasi Kwarteng’s ‘mini-Budget’ on 23 September 2022, followed by Jeremy Hunt’s ‘emergency statement’ on 17 October 2022. Then a further Autumn Statement on 17 November 2022 has led to the Budget itself being subsequently announced for 15 March 2023.

So four “Budgets” in six months or to put it another way, one more than the number of Prime Ministers in the same period!

Some of the tax measures announced in the Autumn Statement 2022, have already been legislated through an Autumn Finance Bill, which became  Finance Act 2023  and any further measures announced at the Budget itself will follow in a second 2023 Finance Act, which it is expected will also include those measures previously published for inclusion in Finance Bill 2023 in July 2022.

In case this all seems a little hard to follow we thought it would be worthwhile summarising some of the main changes we know about and that might affect our clients.

Business tax

• Main rate of corporation tax for financial year 2023 increased to 25%;
• Rate of diverted profits tax increased from 25% to 31%;
• Capital allowances super-deductions (first-year allowances) removed on 31 March 2023;
• First-year allowances on electric vehicle charging points due to be removed 31 March 2025/5 April 2025;
• Banking company surcharge rate reduced from 8% to 3% and the surcharge allowance increased from £25,000,000 to £100,000,000 ( CTA 2010, s. 269DA , 269DE ,  269DF  and  269DJ , as amended by  FA 2022, s. 6 );
• Rates of theatre tax credits reduced to 35% and 30% (from 50% and 45% for 2022–23): the standard rates are 25% and 20;
• Rate of orchestra tax credits reduced to 35% (from 50% for 2022–23): the standard rate is 25%;
• Rates of museum and galleries exhibition tax credits reduced to 35% and 30% (from 50% and 45% for 2022–23;
• Research and development expenditure credit increased from 13% to 20%;
• Research and development additional SME relief: rate of additional deduction reduced from 130% to 86%; rate of the deemed trading loss for pre-trading expenditure reduced from 230% to 186%; rate of surrenderable loss for R&D tax credit reduced from 230% to 186%; and rate of the tax credit reduced from 14.5% to 10%;

Personal tax

Rates and allowances:

• income tax basic rate limit and personal allowance frozen at £37,700 and £12,570 respectively, with indexation provisions disapplied;
• income tax additional rate threshold lowered from £150,000 to £125;
• dividend allowance reduced from £2,000 to £1,000;
• blind person’s allowance increased to £2,870 from £2,600;
• married couple’s allowances increased to £10,375 from £9,415;
• Class 4 National Insurance contributions lower profits limit increased to £12,570 from £11,908 to align with the personal allowance;

Employment taxes

• Car fuel benefit charge figure used for calculating the cash equivalent amount increased to £27,800 from £25,300;
• Van benefit charge increased to £3,960 from £3,600;
• Van fuel benefit charge increased to £757 from £688;

Pensions tax

• Standard lifetime allowance frozen at £1,073,100 and indexation disapplied

Capital gains tax

• Capital gains tax annual exemption reduced from £12,300 to £6,000 and indexation provisions repealed

Inheritance tax

Nil-rate band and residence nil-rate band already frozen at £325,000 and £175,000 (up to £2,000,000) respectively by disapplication of rates bands indexation provisions

As we await the Chancellor’s Spring Budget on Wednesday 15th March, there are loud calls for the Government to reduce the planned Corporation Tax increase and continue with the capital allowance super deductions.  However, the Chancellor has downplayed the prospects of a major tax cutting budget.  We will inform clients of the key points from the Spring Budget as quickly as we can on 15th March.

Castletons Accountants