Budget 2023: At a glance

The Chancellor, Jeremy Hunt, made his Spring Budget 2023 speech on Wednesday 15 March. Highlights of the speech include a proposal to allow companies to expense Capital Allowances and to abolish the pension Lifetime Allowance. Further key announcements for Small and Medium Sized Entities (SMEs) and their owners are below.

Income Tax rates and allowances

• No changes were announced. These remained locked until 2028.
• There are increases to the blind persons and married couples allowances, as already announced last Autumn.

See Income Tax rates & allowances

Energy Price Guarantee

The domestic Energy Price Guarantee will be extended at its current level of £2,500 for another three months until June 2023.

See Energy Price Guarantee extended for three months

Pensions

It is proposed that from April 2023:

• The lifetime allowance limit is abolished.
• The maximum pension tax-free lump sum is frozen at 25% of the current lifetime allowance limit.
• The annual allowance is increased to £60,000 per year with increases to the tapered annual allowance and adjusted income level.

In addition, there will be changes to the taxation of Serious Ill-Health Lump Sum (SIHLS), Defined Benefits Lump Sum Death Benefit (DBLSDB) and Uncrystallised Funds Lump Sum Death Benefit (UFLSDB), which are currently subject to a 55% tax charge above the LTA, to ensure that they are instead taxed at an individual’s marginal tax rate.

The proposed measures mean that from April 2023 no taxpayer should face a lifetime allowance charge on their pension pot.

From April 2024:

• There is a previously announced measure placing a duty on HMRC to make top-up payments to individuals who save into an occupational pension under net pay arrangements if their total taxable income is below the personal allowance.

See Budget 2023: Pensions 

Capital Allowances

From April 2023: 

• Companies incurring qualifying expenditure on new plant and machinery before 1 April 2026 will be able to claim either a 100% or 50% First Year Allowance (FYA). The 100% allowance is known as 'full expensing'.
• The temporary £1m Annual Investment Allowance (AIA) limit is made permanent. 
• 100% FYAs on electric vehicle charge-points are extended to 31 March 2025 for Corporation Tax purposes and 5 April 2025 for Income Tax purposes. 

See Budget 2023: Capital Allowances

Investment zones

From Royal Assent of Spring Finance Bill 2023, special tax sites in or connected with Investment Zones will now be able to benefit from a package of tax reliefs including:

• Stamp Duty Land Tax (SDLT) relief.
• Enhanced capital allowances of 100% for plant and machinery.
• Enhanced structures and buildings allowances.
• Relief from secondary Class 1 National Insurance contributions (Employer NICs) for eligible employers on the earnings of eligible employees up to £25,000 per annum.
• Relief from Business rates.

See Budget 2023: Investment Zones

Self-Employed taxpayers 

Extending the Cash Basis: a consultation

• HMRC have launched a new consultation on Extending the Cash basis for Self-Employed taxpayers.
• The consultation, published with the Budget 2023 documents asks for your views on options to extend and simplify the Self-employed Cash Basis, a simplified way of calculating taxable profits for Income Tax purposes. 
• The proposals mainly affect businesses currently eligible for the cash basis with turnover under £300,000, however, one proposal is to extend the cash basis to more sizeable businesses.

See Consultation: Expanding the Cash Basis

Tax conditionality: Scotland and Northern Ireland

From 2 October 2023:

• Legislation will be introduced in Spring Finance Bill 2023 to extend existing tax checks for taxi and scrap metal licence renewals, which apply in England and Wales, to Scotland and Northern Ireland.
• These checks will apply to license renewals for:
  • Drivers of taxis in Scotland and Northern Ireland.
  • Drivers of private hire cars in Scotland.
  • Operators of a booking office in Scotland.
  • Metal dealers who operate on a site or on an itinerant basis in Scotland.

Policy paper: New tax checks for licence renewal applications in Scotland and Northern Ireland

Farmers: Taxation of Farming Lump Sum Exit Scheme payments

From 6 April 2022:

Legislation will be included in Spring Finance Bill 2023 to provide that payments received under the Lump Sum Exit Scheme (LSES) which relate to an eligible claim are neither receipts of a trade nor miscellaneous income.

See Budget 2023: Capital Gains Tax

Social Security Benefits & tax

Taxation of new social security benefits

From 6 April 2023:

• A new power that enables the tax treatment of new payments or new top-up welfare payments, introduced by the devolved administrations, to be confirmed as taxable social security income through secondary legislation.

Tax treatment of payments from the Welsh Government’s Jobs Growth Wales Plus scheme

 From 1 April 2022:

• Spring Finance Bill 2023 will exempt payments of the training allowance under the Welsh Government’s Jobs Growth Wales Plus scheme from Income Tax, with retrospective effect.
• The scheme was introduced by the Welsh Government on 1 April 2022, to replace Traineeships and Jobs Growth Wales.

Increase in Qualifying Care Relief

From April 2023:

• This measure increases the amount of the Income Tax qualifying care relief available to foster carers and shared lives carers and automatically increases the relief each year in line with inflation.

See Budget 2023: Social security benefits & tax

Free Childcare

From April 2024:

• Children from the age of two will be entitled to 15 hours of free childcare.
• Children from three to four will be entitled to 15 hours of childcare, which can be increased to 30 if the parents are eligible (see below).

From September 2024:

• Children from the age of nine months will be entitled to 15 hours of free childcare.
• Children from three to four will be entitled to 15 hours of childcare, which can be increased to 30 if the parents are eligible (see below).

From September 2025:

• Working parents of all children over nine months but under five will be entitled to 15 hours of free childcare, this can be increased to 30 if the parents are eligible (see below).

It is worth noting that the free hours of childcare are for 38 weeks of the year.

See Budget 2023: Free Childcare

Employees: Share Option schemes

Enterprise Management Incentives (EMI)

From 6 April 2023:

• Simplification measures will remove the requirements for the company to:
  • Set out within the EMI option agreement the details of any restrictions on the shares to be acquired under the option.
  • Declare that an employee has signed a working time declaration when they are issued an EMI option. It does not remove the working time requirement itself.

From 6 April 2024:

• The deadline for notifying an EMI option will be extended from 92 days following grant to the 6 July following the end of the tax year. This will be legislated separately and the impacts will be set out at that point.

Company Share Options Plans (CSOPS)

Both measures were announced last Autumn. Additionally, it is noted that changes to the share options limit will now be achievable through secondary rather than primary legislation.

From 6 April 2023:

• Qualifying companies will be able to issue up to £60,000 of CSOP options to employees. The current limit is £30,000.
• Currently where a company has more than one class of ordinary share capital, shares included in a Company Share Option Plan scheme must be from a share class that is ‘worth having’

See Budget 2023: Share Options from Employment

Capital Gains Tax (CGT)

No further announcements were made in respect of CGT rates and allowances since last Autumn where the following allowances were set.

From April 2023:

• Finance Act 2023 reduces the Annual Exemption from £12,300 to £6,000 for individuals and personal representatives, and from £6,150 to £3,000 for most trustees.
• The proceeds reporting limit for CGT is fixed at £50,000.

See CGT Rates & Allowances

New CGT measures included:

Completion of unconditional contracts

From April 2023:

• Certain time limits will be extended where there has been a transfer under an unconditional contract that completes after the end of the tax period of the disposal.

Share or securities exchanges

From 17 November 2022:

• Anti-avoidance provisions can deem shares in a non-UK company acquired in exchange for shares in a UK close company to be located in the UK.

LLPs and Scottish partnerships disposing of joint interests in land

From 6 April 2023:

• Rollover Relief and Private Residence Relief will be available for Limited Liability Partnerships (LLPs) and Scottish Partnerships as it would be if the land was held by the individual partners.

Transfer of assets between spouses and civil partners in the process of separating

From 6 April 2023:

• Separating spouses or civil partners be given up to three years after the year they cease to live together in which to make no gain/no loss transfers of assets.

Taxation of Farming Lump Sum Exit Scheme payments

From 6 April 2022:

Legislation will be included in Spring Finance Bill 2023 to provide that payments received under the Lump Sum Exit Scheme (LSES) which relate to an eligible claim are neither receipts of a trade nor miscellaneous income.

See Budget 2023: Capital Gains Tax

Trusts & Estates

From 6 April 2024:

• Trusts and estates with income up to £500 will not pay any tax on that income as it arises.
• The default basic rate and dividend ordinary rates of tax that apply to the first £1,000 of discretionary trust income will be removed.
• Beneficiaries of UK estates receiving distributions of income within the above £500 limit will not pay tax on that income.

From Budget 2023: Trusts, Estates & IHT

Companies

Research & Development (R&D)

Additional Tax Relief for R&D intensive SMEs

From 1 April 2023:

• An increased tax credit of 14.5% will be available to loss-making Small and Medium-sized Enterprises (SMEs) that are R&D intensive.
  An R&D-intensive company is one with a qualifying expenditure to total (tax-adjusted) expenditure (intensity) ratio of 40% or more.

Reform of Research & Development Relief

Previously announced measures have been confirmed.

From 1 April 2023:

• The scope of qualifying expenditure will be extended to include datasets and cloud computing. In an attempt to combat abuse, companies will need to inform HMRC in advance if they intend to make an R&D claim.

Cultural Reliefs

From 1 April 2023:

• The tapering down of three cultural reliefs will be delayed for two years.
• The rates of relief for Theatre Tax Relief (TTR), Orchestra Tax Relief (OTR) and Museums and Galleries Exhibition Tax Relief (MGETR) will remain at 50% (or 45% for non-touring TTR and MGETR) until 1 April 2025.
• The sunset clause on MGETR will also be postponed for two years. Expenditure will no longer qualify for relief from 1 April 2026.

Seed Enterprise Investment Scheme

For shares issued on or after 6 April 2023 (and as previously announced in the Autumn Statement 2022):

• The company investment limit will increase from £150,000 to £250,000.
• The gross asset limit will be increased from £200,000 to £350,000 and the trading time limit increased from two to three years.
• The individual annual investor limit will be raised from £100,000 to £200,000.

Double Taxation Relief (DTR)

With effect from 20 July 2022:

• Some extended time limit claims where the DTR is based on deemed foreign tax will now be prevented.
• This measure only relates to claims dating back to pre-2009 when the distribution exemption was introduced.

Large Corporates

The Chancellor announced measures for large corporates that included Transfer Pricing, top-up taxes, energy levies and REITs.

See Budget 2023: Large Corporates

See Budget 2023: Corporation Tax

Plastic Packaging Tax

From 1 April 2023:

• The rate of Plastic Packaging Tax (PPT) will increase from £200 per tonne to £210.82 per tonne.
• Technical legislative changes will apply to ensure that all late payments in respect of PPT are subject to the same penalties.

Policy paper: Plastic Packaging Tax rate change from 1 April 2023

Policy paper: Changes to Plastic Packaging Tax late payment penalties

Charities and Amateur sports clubs

From 15 March 2023

• A restriction on charitable tax reliefs so that they apply only to UK charities and Community Amateur Sports Clubs (CASCs). This stops EU and EEA charities and CASCs that HMRC has not previously accepted as qualifying for charitable relief from claiming UK tax reliefs now that the UK has exited the EU.
• EU and EEA charities that HMRC has previously accepted as qualifying for relief will have a transitional period until April 2024. 
• Policy paper: Restriction of Charitable Reliefs

VAT

Measures announced in respect of VAT include:

• Changes to VAT accounting rules for Drink Deposit Return Schemes.
• Proposals to digitise the DIY Housebuilders Scheme and extend the time limit to six months from completion of the build.
• Technical changes to late payment interest, penalties and repayment interest affecting commencement dates under the new VAT interest and penalty rules in certain circumstances.
• Extension of the VAT exemption for healthcare to include services carried out by staff directly supervised by UK registered pharmacists.
• Extension of the zero rate of VAT for certain other medicines dispensed on prescription.

See Budget 2023: VAT

Tax Administration & Assessment

Tax refunds

From 15 March 2023:

• A taxpayer is no longer able to legally assign their Income Tax repayment to a third party, or their right to an Income Tax repayment.
• The effect of this measure is that assignments of Income Tax repayments will have no legal effect and the repayment will remain the property of the taxpayer.

 

Homes for Ukraine: Property Tax exemptions & reliefs

• Spring Finance Bill 2023 introduces temporary reliefs from the ATED and the 15% rate of SDLT for dwellings made available for occupation by individuals granted entry clearance or permission to stay in the UK under the Homes for Ukraine Sponsorship Scheme.
  For ATED, the relief will apply to chargeable periods beginning on or after 1 April 2022 and for SDLT, the relief will have retrospective effect from 31 March 2022.

Homes for Ukraine: income tax and corporation tax exemption

• Spring Finance Bill 2023 to exempt ‘thank you’ payments made by Local Authorities to sponsors under the Homes for Ukraine scheme from income tax and corporation tax.

Cryptoassets reporting

From 6 April 2024:

• Changes to the Self Assessment tax return forms SA108 (Capital gains summary page) and SA905 (Trust and estate capital gains page) require amounts in respect of cryptoassets to be separately identified.
• The changes will be introduced on the forms for tax year 2024-25.

Introducing an elective accruals basis for the carried interest rules

From 6 April 2022:

• The government will legislate in Spring Finance Bill 2023 to provide a new elective accruals basis of taxation for carried interest.
• This will allow UK resident investment managers to accelerate their tax liabilities in order to align their timing with the position in other jurisdictions, where they may obtain double taxation relief. 
• See Tax on carried interests

Tackling promoters of tax avoidance

• A new consultation will consider the introduction of a new criminal offence for promoters of tax avoidance who fail to comply with a legal notice from HMRC to stop promoting a tax avoidance scheme. 
• The government will also consult on expediting the disqualification of directors of companies involved in promoting tax avoidance including those who exercise control or influence over a company.

Doubling maximum sentences for tax fraud

• The government will double the maximum sentences for the most egregious forms of tax fraud from seven to 14 years. 

Abolition of the Office of Tax Simplification (OTS)

• Spring Finance Bill 2023 will abolish the OTS.