The Spring Budget

 In Tax, The Budget

The Spring Budget

The Chancellor Jeremy Hunt delivered his Spring Budget on 15th March 2023 stating that his priorities are ‘long term, sustainable, healthy growth’.

Here are the key points from the Spring Budget.

Income Tax
The income tax personal allowance, higher rate threshold, main national insurance thresholds and the inheritance tax thresholds will all be maintained at current levels until April 2028.

Personal Allowance
The personal tax-free allowance for 2023-2024 remains at £12,570.

The main rate for national insurance contributions is 12% for employees, and 13.8% for employers for 2023-2024.

Basic Rate Tax
For the tax year 2023-2024, the basic rate of income tax will remain at 20%, which means if your taxable income falls within the basic rate band, you’ll pay income tax at a rate of 20%.

Basic Rate Band
The basic rate tax band for 2023-2024 is £37,700. This is in addition to the personal allowance of £12,570, giving a total of £50,270 before the higher rate tax bracket.

Top Rate of Income Tax
The starting point for the 45p tax rate has been reduced to £125,140 from £150,000. This amount varies if income includes dividends, which are subject to different rates.

Capital Gains Tax
The Annual Exempt Amount for capital gains tax will be cut from £12,300 to £6,000 in April 2023 and then to £3,000 from April 2024.

Dividend Allowance
Dividend allowance will be cut from £2,000 to £1,000 in April 2023 and then to £500 from April 2024.

Dividend Tax
Dividend tax rate of 8.75% remains in the basic rate tax band, which is up to £50,270. The dividend tax rate is 33.75% for the higher rate tax band, which is from £50,270 to £125,140. For income over £125,140, the additional tax rate of 39.35% is charged on dividends.

High Income Child Benefit Charge
The High-Income Child Benefit charge (also known as ‘clawback’) remains applicable to whoever is the higher earner in a couple where one receives Child Benefit and either of them has income of more than £50,000.

Child Care
From April 2024, working parents of two-year-olds will be able to access 15 hours of free childcare per week. This will be extended to working parents of 9 month to two-year-olds from September 2024. All eligible working parents of children aged 9 months up to 3 years will be able to access 30 free hours per week from September 2025.

Corporation Tax
There was confirmation of the corporation tax rate increase from 19% to 25% from 1 April 2023 on profits over £250,000 and marginal rate of 26.5% on profits between £50,000 and £250,000. Up to £50,000 in profits, the rate of corporation tax is 19%.

VAT Threshold
The registration threshold remains at £85,000, with the VAT deregistration level at £83,000 until March 2024.

The Super Deduction
The ‘Super-deduction’ for plant and machinery bought by companies up to 31 March 2023 has been replaced by 100% first-year allowance for qualifying capital expenditure, without upper limit, for three years from 1 April 2023, which means you can offset the cost of qualifying assets against taxable profits.

Capital Expensing Scheme
A new temporary measure to fully deduct certain plant and machinery costs will last until March 2023 replacing the current “super-deduction” scheme. Every pound invested by qualifying businesses in qualifying equipment can be used to reduce the amount of taxable profits. The expensing of capital expenditure applies to new and unused items, excluding cars and leased items. However, the £1 million Annual Investment Allowance is already available, so the new scheme will only be relevant to limited companies investing over £1m in qualifying capital items.

Employers NIC’s
The Employers NICs threshold will be frozen until April 2028. The Employment Allowance remains at £5,000.

National Living Wage
The National Living Wage will increase next year by 9.7%, pushing up the hourly rate to £10.42 from April 2023.

National minimum wage amounts for April 2023
• National Living Wage (23 and over): £10.42 (increase from £9.50)
• 21-22: £10.18 (increase from £9.18)
• 18-20: £7.49 (increase from £6.83)
• Under 18: £5.28 (increase from £4.81)
• Apprentice (under 19, or over 19 and in the first year of apprenticeship): £5.28 (increase from £4.81)

Personal Savings Allowance
The personal savings allowance is £1,000 of tax-free interest for basic rate taxpayers, and £500 for higher rate taxpayers.

The investment limit for 2023 to 2024 will remain at £20,000 for a standard adult ISA (within which £4,000 may be in a Lifetime ISA) and £9,000 for a Child Trust Fund, a Junior ISA.

Tax reliefs given to registered pension funds are limited in amount by two main rules: the Annual Allowance and the Lifetime Allowance. From April 2023, the annual allowance will be increased to £60,000, up from £40,000, increasing the amount that can be put into a tax-favoured pension fund. The lifetime allowance, which was £1,073,100, is being abolished from April 2024, meaning that more money can be put into a pension pot without incurring a tax charge. The minimum age at which a person can first access their pension is currently 55, this will increase to 57 from April 2028.

Electric Vehicles
Electric Vehicles will no longer be exempt from Vehicle Excise Duty from April 2025.

Employee Vans and Fuel
Providing an electric van available for an employee’s private use does not result in a tax charge for the employee. However, providing a petrol or diesel van to an employee for private use would have a tax implication for the employee, based on the ‘deemed’ income figure of £3,960 (up from £3,600), plus an additional £757 if fuel is also provided for personal use (up from £688). This would result in tax payable by the employee of £792.00 for the private use of the van, and a further £151.40 for the fuel benefit, assuming the employee is a basic rate taxpayer. These amounts would be doubled for a higher rate taxpayer.

Rent a Room Allowance
This remains at £7,500 before tax is payable if you rent a room in your house to a lodger.

Energy Bills

The Energy Price Guarantee – the amount that energy suppliers can charge consumers – will be maintained at £2,500 for a further three months. It will increase to £3,000 on 1st July 2023.

Sources: The Telegraph HMRC
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