Spring Budget bulletin

In his second fiscal event as Chancellor Jeremy Hunt made several announcements, focusing on the cost-of-living crisis; encouraging people back into the workforce; and boosting the economy. Alongside extension of both the energy price guarantee and free childcare provision a number of expected and unexpected tax announcements were made. The main tax announcements include:

Business Tax changes

The increase to the main rate of corporation tax from 19% to 25% in April will go ahead as planned. To encourage business investment, new 100% full year expensing of capital expenditure on main rate assets, and 50% First Year Allowances for special rate assets will apply for corporation tax purposes. The allowances will apply to qualifying expenditure incurred from 1 April 2023 to 31 March 2026; with a view to making the relief permanent when the economy allows.  

The new allowance will replace the current 130% super-deduction which will expire on 31 March 2023, and is forecast to cost £8.0bn in 2023-24 rising to £10.7bn in 2024-25.

Pension relief

As widely reported, the Chancellor announced an increase to the annual allowance for pensions, which sets an overall limit on the tax-relieved pension savings an individual may enjoy in any tax year, from £40,000 to £60,000. The lifetime allowance which currently limits the overall pension savings an individual may enjoy tax-free over their lifetime is to be abolished, meaning that individuals will have no overall lifetime limit.

Investment zones

The government has announced that 12 Investment Zones will be established across the UK, subject to successful proposals. The Investment Zones will have access to a single 5-year tax offer matching that in place in Freeports. The tax offer includes enhanced rates of Structures and Buildings Allowance and relief from Stamp Duty Land Tax, Business Rates and Employer National Insurance Contributions. The reliefs will be time limited with the exact end date to be confirmed. The Zones will have access to flexible grant funding to support skills and provide specialist business support. Further information on when Investment Zone tax sites will be announced will be made available in due course.

Innovation

Several announcements were made regarding tax reliefs focusing on innovation. From 1 April 2023 R&D intensive Small and Medium Enterprises (SMEs) that meet certain eligibility criteria will be able to claim the repayable tax credit at the higher rate of 14.5% (equivalent to up to 27p in the pound) compared to 10% for other SME claimants (equivalent to up to 19p in the pound). Previously announced restrictions due to be introduced to the R&D tax relief schemes regarding overseas spend will be delayed by one year and now come into effect on 1 April 2024, to allow the government to consider the interaction between the restriction and a new potential merged R&D relief. Conversely, the previously announced additional documentation requirements are being brought forward to apply to any claim made on or after 1 August 2023. Finally, it was confirmed that draft legislation will be released alongside the draft Finance Bill in the summer regarding the recently consulted on merger of the RDEC and SME tax relief schemes.

Certain creative reliefs are to be reformed and implemented from January 2024. These include reforming film, high-end TV and video games tax reliefs to expenditure credits with a rate of 34%; and restricting the qualifying expenditure for video games tax relief from EEA to UK expenditure.