Spring 2023 Budget

The Spring 2023 Budget - What's inside?

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The Chancellor delivered his Spring 2023 Budget this week.  With the exception of major changes to pension tax reliefs, the majority of the tax measures that were announced before Christmas and are unchanged:

• Freezing tax, VAT and National Insurance thresholds and reducing the point at which people pay additional rate tax
• Reducing the threshold at which people pay dividend tax to £1,000
• Reducing the Capital Gains Tax Exempt Amount
• Quarterly Tax Returns for Sole Traders and Landlords (Making Tax Digital) deferred until at least 2026

Find all the details you need to see in the "read below"...

​Corporation tax and capital allowances 

The planned increase in corporation tax to 25% will go ahead as planned and smaller companies will continue 19% although there are some very complicated rules around owning multiple companies and accessing the lower rate so less is certainly more when it comes to controlling companies!   The general rule is for small business owners to aim to control as few companies as possible to access more of the 19% rate so consider carefully how many companies you control!
The annual investment allowance will be unlimited for the next 3 years which means the cap of £1m investment is removed.  This applies to plant and not goodwill, land and buildings.
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​Electric Cars

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No changes were made to what was announced before Christmas:

• There will be a small increase in salary equivalents (P11D) from April 2025
• Vehicle Excise Duty will no longer be free for those vehicles from April 2025

Electric vehicles are still therefore worthy of consideration to run through companies but must be brand new to access the best tax incentives
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​VAT Threshold

The VAT threshold will remain at £85,000 – remember this is a rolling 12 month period not a calendar or business year and given 10% inflation is is becoming much easier to hit this threshold!  Don’t forget zero rated supplies like certain cold foods also count towards the £85k but don’t actually incur VAT
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​Personal tax

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The personal tax regime for 2023/24 will operate as follows:

• The personal allowance is frozen at £12,570 until 2028;
• The additional (45%) tax rate will now be payable on incomes of more than £125,140;
• A reduction in the dividend allowance from £2,000 to £1,000 from April 2023 and then £500 from April 2024 – this will affect the vast majority of company owners and potentially introduce a lot more people to self assessment as dividends from stock market companies are not taxed at source
• Capital Gains Tax: a reduction in the annual exempt amount from £12,300 to £6,000 from April 2023 then £3,000 from April 2024
• Depending on your income it is now possible to put £60k (gross) per annum into a pension (£48k net) with the lifetime allowance having been removed

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​National Insurance and Dividend Tax

As previously reported, national insurance contributions will be cut by 1.25 percentage points from November this year. The health and social care levy, due to come in from April 2023, was also cancelled in September.
Although originally historically linked to National Insurance, dividend tax has not been reduced and remains at 8.75% for basic rate tax paying Company Directors.  It is however worth remembering that the point where individuals pay National Insurance is significantly higher than it was this time last year and is now aligned with the Personal Allowance

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