Jeremy Hunt’s first Budget since becoming Chancellor included incentives to try to get the number of people in employment back to pre-pandemic levels and encourage business investment. This comes as part of a plan to reduce inflation, grow the economy and get government debt falling.
There were not many major shocks, as expected, with the Chancellor building on the Autumn Statement which sought to bring stability to the economy and boost investor confidence.
Whilst some of the key measures were aimed at assisting with household energy and childcare costs, there were several announcements that may impact your personal or business tax affairs, as set out below.
Changes to pensions from 6 April 2023:
- The Annual Allowance (AA) – the maximum tax-free amount that you can pay into your pensions in a tax year – is increasing from £40,000 to £60,000.
- The money purchase AA, for those who have flexibly accessed pension savings, will increase from £4,000 to £10,000.
- For high earners, the threshold at which the AA is tapered will increase from £240,000 to £260,000. The minimum tapered AA is increasing from £4,000 to £10,000.
- The Lifetime Allowance (LTA) - the total amount of tax relievable pension savings you can benefit from over the course of your lifetime - is being removed.
- The tax-free lump sum that can be taken will be capped at £268,275 for those without existing ‘pension protection’. Lump sums in excess of the LTA will now be taxed at an individual’s marginal rate.
Changes for businesses from 1 April 2023:
- It has been confirmed that the Corporation Tax rate will increase from 19% to 25% but with marginal relief for businesses with profits between £50,000 and £250,000.
- A new Research & Development (R&D) scheme is being introduced for small/medium-sized companies which spend at least 40% of their total expenditure on R&D. Eligible loss-making companies will be able to claim £27 for every £100 of R&D investment.
- The Annual Investment Allowance (AIA), giving 100% tax relief to unincorporated businesses and companies investing in qualifying plant and machinery, is now permanently set at £ 1 million.
- Full expensing, giving a 100% deduction for the cost of certain plant and machinery for three years. This would be useful to companies (not unincorporated businesses) making investments in excess of the £1m AIA.
As always, if you would like to discuss how the announcements impact you and your business, please call one of our friendly advisers on 01223 810100 at CKLG Accountants and Chartered Tax Advisors, Cambridge.
