Solicitors in Westminster, London
Spring Budget 2023 - A Very Brief Overview
Spring Budget 2023 - A Very Brief Overview
Further information can be found here: Spring Statement 2023 - A Very Brief Overview
A summary of the tax changes are as follows:
The government will abolish the Lifetime Allowance (LTA) which currently caps the amount that workers can save into their pension tax-free at £1,073,100. Currently, contributions that exceed the LTA are subject to a tax charge of 55% on receipt of a lump sum or, if retained to pay pension benefits, it is charged at 25%. The LTA charge will be removed from April 2023 and abolished entirely from April 2024. This proposed change will allow workers to save more into their pensions and will incentivise higher paid workers to remain in the workplace and not be deterred from working due to having reached the LTA.
The government will also increase the Annual Allowance (AA) of tax-free contributions into savings from £40,000 to £60,000 per annum.
The Tapered Annual Allowance (TAA) will also increase from its current allowance of £4,000 to £10,000 and will now apply to those with incomes of £260,000 or higher as opposed to the current threshold of £240,000 or higher. This change will allow people in this higher income threshold of £260,000 or above to contribute up to £10,000 per annum into their AA. These changes will come into effect on 6th April 2023.
Agricultural Property Relief
The scope of agricultural property relief and woodlands relief will be restricted to property situated within the UK only from 6th April 2024. Currently, property located in the UK or a state within the European Economic Area or Channel Islands and Isle of Man will qualify.
Following reluctance from HMRC to recognise non-UK charities as charitable for tax purposes, the government will restrict charitable reliefs to UK charities and Community Amateur Sports Clubs (CASCs) so that only those that come within the jurisdiction of the High Court in England, Wales or Northern Ireland, or the Court of Session in Scotland will qualify for UK charitable tax reliefs.
From 15th March 2023 any new applications for tax recognition by charities or CASCs will need to comply with the new rules. For non-UK charities and CASCs that have asserted their status for charitable tax reliefs on 15th March 2023, there will be a transitional period until April 2024. From April 2024, all non-UK charities and CASCs will no longer be eligible to claim UK charitable tax reliefs.
No changes were made to the taxation of non-domiciled individuals on either income or capital. This means that non-domiciled individuals who are UK resident can carry on using the remittance basis for up to 15 of the last 20 UK tax years. After this period, the non-domiciled UK resident individual becomes deemed domiciled for all UK tax purposes.
An anti-avoidance measure has been introduced with effect from April 2023 and concerns the acquisition of a UK company by a non-UK company where the sale is effected by share-for-share exchange. In this instance, the non-UK domicile shareholder cannot benefit from the ‘remittance basis’ on the new shares. This anti-avoidance measure applies only where both the old company and the new company are close companies (or would be if UK-resident) in which the individual in question holds more than a 5% interest. Thus, this point will not normally apply to a foreign-domiciled entrepreneur selling his or her UK company in return for equity in a publicly-quoted overseas acquirer.
There will be a reduction to the additional 45% income tax threshold from £150,000 to £125,140. These changes will come into effect on 6th April 2023. In addition to this, a reduction in the tax-free dividend allowance from £2,000 to £1,000 will come into effect from 6th April 2023, which will be further reduced to £500 from 6th April 2024.
Capital Gains Tax (CGT)
From 6th April 2023, the annual exemption will be reduced from £12,300 to £6,000 for individuals and personal representatives, and from £6,150 to £3,000 for most trustees.
Other interesting changes to CGT concern the time limits in which HMRC can make an assessment.
When entering into an unconditional contract, the date of the deemed disposal is the date in which the contract was entered into and not the date of completion (Section 28(1) Taxation of Chargeable Gains Act 1992). The time limits in which HMRC can make a CGT assessment or claim a refund or repayment cannot be claimed more than 4 years after the end of the relevant tax year (Section 34 of the Taxes Management Act 1970).
Where contracts are entered into in the earlier tax year but are completed in the later tax year, this presents difficulties for HMRC, since by the time completion occurs the time limit for assessing the earlier year may have passed.
The rule is not being changed to make the assessing time limit run from completion, but only for contracts that are entered into on or after 6th April 2023.
From 1st April 2023, corporation tax will increase from 19% to 25% on profits over £250,000.
To caveat this unwelcomed increase, a new short-term boost for business investment will be implemented for the next 3 years. A £9bn policy of "full capital expensing" will allow firms to write off all investment against their tax bills. This short-term scheme offers 100% relief in the first year meaning all new qualifying plant and machinery investment expenses can be deducted from taxable profits.
The contents of this article do not constitute legal advice and are provided for general information purposes only. The contents are copyright of Lee Bolton Monier-Williams LLP. All rights reserved.