The Chancellor of the Exchequer, Jeremy Hunt, delivered his first Spring Budget yesterday and, as we expected, the statement primarily focused on growing the economy and continuing to support families with the cost-of-living crisis.
The chancellor confirmed that the main rate of corporation tax will increase from 19% to 25% in April 2023 for companies which generate a profit of over £250,000. The government did announce plans to mitigate the impact of these increases, as part of its drive to create a competitive investment environment, through separate corporate tax reforms.
The updates to the pension regime were more extensive than expected, with the annual tax-free pension allowance increasing from £40,000 to £60,000 from April 2023 (the relief remains tapered for higher earners). The lifetime allowance, currently £1.07 million, is to be completely abolished from April 2024. These changes will make the use of pension savings more attractive for inheritance tax planning on death.
There were no other significant private client measures in the remainder of the Budget. There were, however, some additional announcements of interest including:
The government is also going to consider modernising HMRC’s income tax services in order to move towards a more digital approach. In addition, plans were announced for a consultation on a new criminal offence for the promoters of tax avoidance schemes, including potentially disqualifying company directors involved in such schemes.
Finally, when considering this Budget, it is important to remember the tax changes announced in the 2022 Autumn Statement which will be coming into effect on 6 April 2023, including:
The reduced or frozen allowances and thresholds will have a real impact as they result in higher taxes on income and capital gains, and in a greater inheritance tax burden.
If you have any questions or concerns about the impact of the Spring Budget on your affairs, please contact us. We will be happy to advise.
This article was co-written with Robyn Dann, associate in the private client team.