Jeremy Hunt delivered his first Spring Budget as Chancellor on Wednesday 15th March.
In this article, we set out the key announcements that Jeremey Hunt unveiled in his Spring Budget on the 15th of March. Having already made some tax announcements in the Autumn Statement in November last year, the Chancellor is taking a light touch on the overall tax landscape. So, what's changed and what hasn't?
Corporation tax There was confirmation that the corporation tax rate will be increasing to 25% from April 23, for any businesses with profits over £250,000. Also, the Annual Investment Allowance rate will be fixed at £1m. This means that for the first £1m spend on new or used plant and machinery, 100% of the cost of this will be set against taxable profits, potentially reducing your corporation tax bill by up to £250k.
Full ExpensingA new allowance was released, called Full Expensing. This allowance is designed to replace the Super Deduction which finished at the end of this month, the qualification criteria is the same - If you were eligible for Super Deduction, you should be eligible for Full Expensing. This is a 100% First Year Allowance with no upper limit, available for spend on new plant and machinery, and will be in place for the next 3 years. This means that the whole cost can be set against tax, a 25% upfront saving. It is not available for unincorporated businesses, nor will it work for spend on second hand or leased assets. As with the Super Deduction, it cannot be used for cars, but can be used for tractors, lorries, vans and other commercial vehicles.
Research and DevelopmentThe additional deduction for R&D expenses has been 130%, but from April this year that is decreasing to 86%. This means the overall R&D additional tax benefit is reducing quite significantly. There is now a requirement to notify HMRC ahead of making a claim, particularly if you are a new claimant, there is also a new format to submit R&D claims and endorsements and sign-off by a senior director of the company.
PensionsCurrently there is what is called an Annual Allowance for pension contributions, this has been at £40,000 per year for some time now. From 6 April this year, this will increase to £60,000 per year, which is a 50% increase! There is also provisions to carry forward these allowances for up to 4 years, so that means that if you have made pension contributions previously, but still have 4 years’ worth of allowances to use, then for a couple, it equates to nearly £480k worth of contributions that could be made in one go, depending on specific circumstances - which is an increase from £320k. Here at Oldfield, we have done a lot with clients with utilising their self-managed pension funds for investing in commercial property, and this announcement today will assist with this greatly, and scope for further opportunities.
Income and Capital Gains TaxAs announced in last year’s statement, there are no changes to the Income tax or National Insurance rates, and as previously stated, the only other change is that the tax-free dividend allowance is halving from 6th April this year to £1,000. Likewise with Capital Gains tax, as covered last time, the key change is that the Annual Exemption Allowance is significantly reducing from April 23 from £12,300 to £6,000.
Fuel dutyThe planned increase of 11p in fuel duty this year will be cancelled & rates will be kept the same for the next 12 months. Circumstances globally, including Putin's illegal invasion of Ukraine, have made fuel prices volatile & today's decision will support motorists. So, this is a reasonable saving compared to what fuel prices could have increased to.
In Summary, these are some of the key points to come out of the Spring Budget and our initial thoughts on the headline announcements. There’s more detail behind these announcements and other points too, which is now available in our budget summary publication which you can download here:
You can also watch our short summary video for a quick round up on some of the key announcements.
Tax affairs are complicated and we would always advise you to speak with your advisers before making any changes. For more information on how we can help you and your business please contact us at info@oldfieldadvisory.com or call 02476673160.
Please note: Some Budget proposals may be subject to amendment in subsequent Finance Act(s). You should contact us before taking any action as a result of the contents of this summary.
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