DB Tax Budget 2023 Comments

Budget 2023

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The Important Bits/Changes

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Comment Jeremy Hunt made no reference at all in his budget speech relating to the following taxes:-

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PAYE

Income Tax

National Insurance

Capital Gains Tax

Inheritance Tax

VAT

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The only tax referred to was in fact Corporation Tax (CT), the bad news is that the increase to 25% will be introduced with effect from 1st April 2023.

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We would remind you that this applies to companies with profits in excess of ￡250K.

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Companies with taxable profits less than ￡50K will continue to pay CT at 19%

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CT Profits between ￡50K and ￡250K will pay at a tapered rate.

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Another big announcement affecting CT was a new temporary 100% Capital Allowances rate running from 1st April 2023 to 31 March 2026, potentially to be extended or made permanent at a later date.

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This is in effect a new “Super deduction” to replace the 130% Super deduction that ends on 31st March 2023.

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This one comes with the same restrictions as the outgoing Super deduction:-

Only applies to Brand new Plant & Machinery, Equipment & Fixtures & Fittings.

Can’t have this if the assets have been bought for the purposes of hiring or leasing out.

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Pre 1 April 2023 –

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Spend ￡10,000 – Tax relief on ￡13,000 @ 19% = ￡2,470

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Post 31 March 2023

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Spend ￡10,000 – Tax relief on ￡10,000 @ 25% = ￡2,500

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Alongside this the old Capital Allowances Rules still apply, so there is still an Annual Investment Allowance (AIA) of ￡1M (this is now permanent) where the above restrictions do not apply.

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Pensions

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The dreaded lifetime allowance has been abolished so total fund value is now unlimited.

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The issue is that for most people they are restricted by profits/income and disposable income as to how much they can afford to contribute each year.

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The second bit of good news here is that maximum annual contributions have been increased from ￡40K to ￡60K from 6 April 2023 (subject to income limits).

Changes coming in that were announced in the Autumn statement of 2022 that will be coming into effect on 6 April 2023.

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Income Tax & NIC’s

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1)????Personal Allowance – unchanged ￡12,570

2)????Additional Rate Band – (45%) lowered starting point from ￡150K down to ￡125,140.

3)????Dividend rates unchanged, i.e. the 1.25% levy to fund NHS remains in place.

4)????Dividend allowance reducing from ￡2K to ￡1K (reduces again by 50% on 6 April 2024)

5)????Class 2 NIC rate increases from ￡3.15 to 3.45 per week.

6)????Class 4 NIC threshold increased to match Personal Allowance ￡12,570.

7)????Class 4 NIC rate reduced to 9%.

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Capital Gains Tax

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1)????Annual Exemption reduced from ￡12,300 to ￡6,000

2)????CGT Rates unchanged.

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Conclusion, not many tax changes arising out of Jeremy Hunt’s first Budget, very disappointing for Company owners who will be suffering an increase of 6% in the rate of Corporation tax which represents an effective increase of 31.6%.