Spring Budget 2023 - summary of tax changes

Chancellor Jeremy Hunt delivered his first full Budget statement, and this was much more in keeping with what we expect from a fiscal statement after the infamous Mini Budget and Autumn Statement of 2022.

Back to business as usual?

The key theme was going for growth – encouraging investment, increasing productivity and developing technology. There were several headline grabbing announcements for both individuals and businesses along with a number of policy tweaks and changes included in the Red Book.

Encouraging business investment

The main business tax policy was the 100% full expensing of ‘main’ plant and machinery for 3 years. This is an extension of the ‘super deduction’ rules which gave a 130% deduction on eligible assets (effectively a 25p corporation tax saving for every £1 spent) and the plan is to make this permanent in the future. Assets that qualify for the ‘special rate’ of capital allowances will be eligible for a 50% deduction.

There will also be higher R&D tax relief for ‘R&D intensive SMEs’ and there is a 12 month delay on the implementation of overseas expenditure restrictions. Creative and cultural reliefs will also have higher rate extensions.

Investment Zones were talked about at length in the speech, with 12 areas being highlighted as potential eligible areas that could become ‘new Canary Wharfs’. Tax cuts and reliefs matching those of Freeports will be available for 5 years in these areas.

Personal tax and pension reform

The biggest news of the Budget from a personal tax perspective was the extension of the annual pension allowance from £40,000 to £60,000 and the abolition of the lifetime allowance. These measures are aimed at preventing workers from retiring early due to pension contribution limits, which has been a big problem for doctors and the NHS.

Other tax announcements

To provide cost of living support, the Fuel Duty 5p cut has been extended by 12 months and Alcohol Duty has been frozen until 2023, with an increase in Draught Relief to help pubs and the hospitality industry.

Always a feature in fiscal statements, there are also new initiatives to tackle tax avoidance schemes. HMRC will also invest in debt management capability, which is anticipated to increase revenues by hundreds of millions of pounds a year.

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