Spring Budget Highlights 2023


https://www.ispeech.org

Tax on dividends

Currently, the first £2,000 of dividends is chargeable to tax at 0% (the Dividend Allowance). This will be reduced to £1,000 for 2023/24 and £500 for 2024/25.

Dividends received above the allowance are taxed at the following rates for 2023/24:

  • 8.75% for basic rate taxpayers
  • 33.75% for higher rate taxpayers
  • 39.35% for additional rate taxpayers.

As corporation tax due on directors' overdrawn loan accounts is paid at the dividend upper rate, this will also remain at 33.75%.

Pension tax limits

These will have effect from 6 April 2023:

  • Increase the Annual Allowance from £40,000 to £60,000.
  • Increase the Money Purchase Annual Allowance from £4,000 to £10,000.
  • Ensure that nobody will face a Lifetime Allowance charge.

Corporation tax rates

From April 2023, the rate will increase to 25% for companies with profits over £250,000.

The 19% rate will become a small profits rate payable by companies with profits of £50,000 or less.

Companies with profits between £50,001 and £250,000 will pay tax at the main rate reduced by a marginal relief, providing a gradual increase in the effective corporation tax rate.

Capital allowances

Full expensing deduction from 01/04/23

Full Expensing is a 100% first year allowance (FYA) which allows companies to deduct the cost of qualifying plant and machinery from their profits straight away with no expenditure limit. Qualifying expenditure will include most plant and machinery, as long as it is unused and not second-hand, but will not include cars.

Full Expensing is only available for companies and not for unincorporated businesses.

Annual Investment Allowances

Annual Investment Allowance was previously confirmed at a permanent rate of £1m from April 2023.

The Annual Investment Allowance (AIA) is available to both incorporated and unincorporated businesses. It gives a 100% write-off on certain types of plant and machinery.

The government will also extend the 100% FYA for electric vehicle charge points to 31 March 2025 for corporation tax purposes and 5 April 2025 for income tax purposes. 

Accounting periods that are not aligned to tax years

This will affect unincorporated businesses that do not draw up annual accounts to 31 March or 5 April. The transition to the new rules will take place in the 2023/24 tax year and the new rules will come into force from 6 April 2024.

Affected self-employed individuals and partnerships may retain their existing accounting period but the trade profit or loss that they report to HMRC for a tax year will become the profit or loss arising in the tax year itself, regardless of the chosen accounting date. Broadly, this will require apportionment of accounting profits into the tax years in which they arise.

If you have a different year end it might be easier to change your accounting year end.

Capital gains tax (CGT) annual exemption

The capital gains tax annual exempt amount will be reduced from £12,300 to £6,000 from 6 April 2023 and to £3,000 from 6 April 2024.

Childcare

Working parents in England will be able to access 30 hours of free childcare per week, for 38 weeks of the year, from when their child is nine-months old to when they start school.

This will be rolled out in stages:

  • From April 2024, all working parents of two-year-olds can access 15 hours per week.
  • From September 2024, all working parents of children aged nine months up to three-years old can access 15 hours per week.
  • From September 2025 all working parents of children aged nine months up to three-years old can access 30 hours free childcare per week.