Our round-up of the 2023 Spring Budget

In this week’s Budget, Chancellor Jeremy Hunt seemed to be taking inspiration from the Oscar winning film, Everything Everywhere All at Once, prioritising Employment, Education, Enterprise, Everywhere.

Against the news that the UK is forecast to avoid recession, the focus was on encouraging people to return to the workforce and boosting business investment.

Read on for our summary of the tax measures included in the Budget.


Government figures show that 350,000 over-50s have not returned to work after the pandemic, meaning that their skills and experience have been lost to the workforce.  The Chancellor wants to encourage over-50s who have retired early back to work, and so has made some generous changes to the pension savings allowances, as well as offering “mid-life MOT” courses and new “Returnership” schemes to help develop and improve skills.  Interestingly, the Office for National Statistics has reported that many “economically inactive” people do not want to return to work, so it remains to be seen whether the changes will be enough.

From 6 April 2023, the Annual Allowance for tax-free pension saving will increase by 50% to £60,000, which was widely predicted in the press.

What was not foreseen, was that the Lifetime Allowance, previously set at £1,073,100, would be fully abolished from the same date.  There had instead been speculation that it would increase.

As individuals can carry forward unused Annual Allowances from the 3 previous tax years, this provides significant opportunities for people to increase their pension pots, noting of course that individuals do need sufficient earnings to take advantage of the reliefs and also that the Annual Allowance is tapered for people with income over certain thresholds.

Full expensing for qualifying capital expenditure

It has already been announced that the £1m temporary limit for the Annual Investment Allowance is to become permanent.

The government has now announced a policy of “full expensing” for the next three years.  Under this policy, companies incurring qualifying expenditure on new plant and machinery before 1 April 2026 will either be able to claim a 100% or 50% First Year Allowance.  The 100% allowance is known as “full expensing”.  For most SMEs, the £1m allowance already provides full expensing but for capital intensive businesses this will be a welcome change.

Additional tax relief for R&D intensive SMEs

From 1 April 2023, a higher rate of relief for loss-making R&D intensive SMEs will be introduced.  This will apply to SME companies where their qualifying R&D expenditure is at least 40% of their total expenditure and they will be able to claim an increased tax credit of 14.5%.

Draft legislation and guidance will be released later in the year and therefore companies that think they will qualify may need to delay claims or submit a claim at the current rate of 10% and consider amending their claim when the legislation is in place.

These changes may be viewed as sending a mixed message at a time when HMRC are increasingly scrutinising SME R&D claims, and making companies jump through ever more challenging hoops in order to justify their claims.  As ever, we will need to watch this space to see how events unfold.

A reminder of previously announced measures

The main tax raising measures coming into force for the next year had already been announced, and included the following.

  • The main rate of corporation tax will increase from 19% to 25% from 1 April 2023 for companies with taxable profits over £250,000.  For companies with taxable profits between £50,000 and £250,000, the effective rate will be between 19% and 25%.  These limits are pro-rated where there are associated companies.  For companies that do not have a 31 March accounting period end, their profits will be split between pre and post 31 March 2023 on a straight line basis. It is worth noting that even with the new rates, the UK will still have the lowest corporation tax rate amongst G7 nations.
  • The threshold for the 45% rate of income tax will reduce from £150,000 to £125,140 from April 2023.
  • The dividend allowance is reduced from £2,000 to £1,000 from April 2023, with a further reduction to £500 from April 2024.
  • The capital gains tax annual exempt amount will reduce from £12,300 to £6,000 from April 2023 and to £3,000 from April 2024.

As ever, if your require any advice or guidance on the impact of these changes on your business or personal circumstances, please do not hesitate to contact us. We would be pleased to help you to reveal your financial clarity.