Budget 2023: Overview

The UK Chancellor delivered his Spring Statement on 15 March 2023 against a backdrop of rising inflation.

It was another sterling performance from Jeremy Hunt, full of candour about the problems the country faces, but also bristling with initiatives to rebuild the economy and make it more productive and pro-growth.

The Chancellor highlighted that “In the autumn we took difficult decisions to deliver stability and sound money… Today, we deliver the next part of our plan. A budget for growth… long-term, sustainable, healthy growth that pays for our NHS and schools, finds jobs for young people, and provides a safety net for older people all whilst making our country one of the most prosperous in the world.”

There were no announcements that require immediate action by taxpayers, however individuals may still want to review their annual tax position and our Year-end tax planning guide may help as a list of things to consider.

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Budget 2023: Key points

  • The Office for Budget Responsibility has predicted that the UK will avoid recession in 2023, but the economy will shrink by 0.2%.
  • The predicted growth is; 1.8% for next year, 2.5% in 2025, 2.1% in 2026.
  • The inflation rate in the UK is predicted to fall to 2.9% by the end of 2023, down from 10.7% in the final 3 months of 2022.
  • The maximum amount that individuals can pay into their pensions (annually) from 6 April 2023 will increase from £40,000 to £60,000.
  • The pensions lifetime allowance (LTA) will be abolished.
  • From April 2023 the capital allowances rules will allow for a limited “full expensing” regime.
  • In addition to full expensing, the annual investment allowance will be “permanently” set at £1m.

Budget 2023: Macro updates

  • The predicted growth is; 1.8% for next year, 2.5% in 2025, 2.1% in 2026.
  • The inflation rate in the UK is predicted to fall to 2.9% by the end of 2023, down from 10.7% in the final 3 months of 2022.
  • The government announced a package of measures intended to simplify customs import and export processes for traders.

Budget 2023: Personal tax

  • Personal tax thresholds: ie personal allowance, basic and higher-rate thresholds for income tax – are maintained until April 2028 at a current level of £12,570 and £50,270. The additional rate threshold is reduced from £150,000 to £125,140 from 6 April 2023.
  • Personal allowance for higher rates – 2023/24: Where annual income exceeds £100,000, personal allowance is lost at a rate of £1 for every £2 of income above £100,000. This is the threshold where the entire personal allowance is lost. The loss of the personal allowance means a person is taxed at 40% on the additional £2 of income, and they also pay an extra 40% on the £1 of personal allowance lost. This results in a marginal rate of 60%, which continues up to £125,140 (£100,000 + (£12,570 x 2)). At the £125,140 point the entire personal allowance has been lost.
  • National insurance: The national insurance thresholds for all classes will be maintained until April 2028 at the current level. The employment allowance is set to the current level of £5,000.
  • Dividend allowance: Dividend allowance is reduced from £2,000 to £1,000 from April 2023 and to £500 from April 2024. The threshold of £2,000 has been in place since April 2018. From 6 April 2022, dividends are taxed at 8.75% (basic rate), 33.75% (higher rate) and 39.35% (additional rate).
  • Capital gains tax – reduce the annual exempt amount: As previously announced, the annual exemption amount for capital gains tax for individuals will change, from £12,300 to £6,000 from April 2023, then £3,000 from April 2024.
  • Pensions reform: The lifetime pension allowance charge will be removed from April 2023 before the allowance is abolished entirely from April 2024. The pension annual allowance is increased from £40,000 to £60,000 from April 2023. Money purchase annual allowance is increased from £4,000 to £10,000, which applies if you have already started drawing a pension.

Budget 2023: Business taxes

  • Corporation tax: From April 2023, the planned increase in the corporation tax rate to 25% for companies with over £250,000 in profits will go ahead. Small companies with profits up to £50,000 will continue to pay corporation tax at 19%. Companies with profits between £50,000 and £250,000 will pay tax at the main rate reduced by a marginal relief providing a gradual increase in the effective corporation tax rate.
  • Annual Investment Allowances: Annual Investment Allowance was previously confirmed at a permanent rate of £1m from April 2023.
  • ‘Full expensing’ deduction: In order to replace super-deduction, a new ‘Full Expensing’ deduction is announced from 1 April 2023 until 31 March 2026. The relief allows companies to claim 100% first-year deduction from profit before tax (50% for special pool rate) on qualifying new main-rate plant and machinery investments.
  • VAT: No further changes to the VAT thresholds have been announced, and the VAT registration and deregistration thresholds at £85,000 will not change for a further period of two years from 1 April 2024.


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