What AAT members need to know about the Spring Budget

The Chancellor of the Exchequer announced his Budget today with a mixture of tax breaks and increases for business.

The theme of this year’s Budget was economic growth and getting people “back to work”. In his speech, Chancellor of the Exchequer Jeremy Hunt MP updated Parliament on the state of the economy, with the UK now expected to avoid a technical recession this year under new OBR forecasts, and inflation also now set to fall to 2.9% by the end of 2023.

While much of the public attention has been on the Budget’s proposals to expand free childcare for one- and two-year-olds in England and extend the Energy Price Guarantee for households for three months, the picture for business was a mixed bag. The major business announcement was the replacement for the ‘super-deduction’ scheme with a temporary full-expensing regime which would allow qualifying expenditure to be written off in the year it is incurred. However, despite intense pressure from the business community, the Chancellor confirmed the increase in Corporation Tax to 25% and the introduction of a less generous Energy Bills Discount Scheme for non-domestic consumers would both go ahead as planned.

For AAT members, the key announcements from the Budget included:

• A new full expensing of capital allowances regime: From April 2023, investments made by companies in qualifying plant and machinery will qualify for a 100% first-year allowance for main rate assets, meaning companies will be able to write off the full cost in the year of investment. Qualifying investments include things like IT and office equipment, vans and lorries, warehouse equipment, tools, construction equipment and kitchen and bathroom fixtures in non-residential properties. Companies investing in special rate (including long life) assets will also benefit from a 50% first-year allowance in the year of investment.
• Changes to R&D Tax Relief: A new credit rate will be available to R&D intensive loss-making companies whose R&D expenditure constitutes at least 40% of total expenditure. Qualifying companies will be able to claim a payable credit rate of 14.5% for qualifying R&D expenditure. The changes will take effect from 1 April 2023 with eligible companies able to claim once the Finance Bill has received Royal Assent.
• Pensions reform: The Annual Allowance, Money Purchase Annual Allowance and minimum Tapered Annual Allowance are all being increased from April 2023. The Government is also abolishing the Lifetime Allowance Charge, before abolishing the Lifetime Allowance altogether in a future Finance Bill.
• Transforming HMRC Guidance and Forms for Small Businesses: Over the next 24 months, the Government will conduct “a systematic review” of tax guidance and forms to make it easier for SMEs to interact with the tax system. This includes clear, simple and easy to find guidance with modernised HMRC forms and step-by-step interactive guidance.
• Expanding the cash basis: The Government has launched a consultation on proposals to reform cash basis for the self-employed so as to increase the number of eligible businesses and increase the use of the cash basis within the eligible population.
• Modernising Income Tax Services: The Government has published a discussion document exploring how HMRC can simplify and modernise Income Tax services as part of its Tax Administration Framework Review.

A summary of all the relevant information in the Budget can be found below. You can also read the full Budget and accompanying documents and an overview of tax legislation and rates.

If you are an AAT member and would like to learn more about the announcements in the Budget, or share your views on how it impacts you, please contact AAT’s Head of Public Affairs & Public Policy: [email protected].

Economic forecast

• The OBR forecasts that the UK will not now enter a technical recession this year.
• The economy is expected to contract by 0.2% this year, before growing by 1.8% next year, followed by 2.5%, 2.1% and finally 1.9% in 2027.
• The OBR forecasts that inflation will fall from 10.7% in December 2022, to 2.9% by the end of 2023.
• The overall tax burden will now be lower for the rest of the Parliament relative to the OBR’s Autumn forecast.
• The UK unemployment rate is set to rise to 4.4%.

Taxation – Business

• Delivering agent access to payrolling Benefits in Kind – the Government will deliver IT systems to enable tax agents to payroll Benefits in Kind on behalf of employers.
• Confirmation that the Government will render void assignments of income tax repayments. This means that assignments of income tax repayments received by HMRC on or after the 15 March 2023 will be legally invalid.
• In a response published alongside the Budget to a previous consultation on the subject, the Government has confirmed its plans to proceed with plans to digitise business rates, which includes a new integrated system for ratepayers to interact with central government.
• The Climate Change Agreement Scheme will be extended for two further years, providing tax reliefs for companies investing in energy efficiency measures.
• A new set of customs measures focused on the simplification of customs import and export processes intended to reduce administrative burdens for traders.

Taxation – Personal

• Consultation on the introduction of a new criminal offence for promoters of tax avoidance who fail to comply with a legal notice from HMRC to stop promoting a tax avoidance scheme. 
• Consultation on expediting the disqualification of directors of companies involved in promoting tax avoidance including those who exercise control or influence over a company.
• Introducing changes to Self-Assessment tax return forms requiring amounts in respect of cryptoassets to be identified separately.
• Legislate to close an avoidance loophole that can leave HMRC out of time to assess tax due on capital gains when an asset is disposed of under an unconditional contract.
• Formalise and extend an existing income tax concession for low income trusts and estates.
• HMRC also intend to make changes to inheritance tax regulations to remove non-taxpaying trusts from reporting requirements.
• The Government will extend the Help to Save scheme by 18 months until April 2025. A consultation will be launched to seek views on longer term options to support low-income savers.

Employment and skills

• The Government is introducing new ‘Returnerships’, a new type of apprenticeship aimed at promoting existing skills interventions to the over-50s, focusing on flexibility and previous experience to reduce training length.
• £63.2 million of new investment will fund an additional 8,000 Skills Bootcamps in 2024-25 in England and 40,000 new Sector-Based Work Academy Programme placements across 2023-24 and 2024-25 in England and Scotland.
• A new White Paper on disability benefits reform is being published, abolishing work capability assessments and enabling benefit claimants to seek work without the risk of losing benefits.
• An enhancement of the DWP’s Midlife MOT strategy – “to ensure the best possible financial, health and career guidance”.

Cost of living and pensions

• The Energy Price Guarantee will remain at £2,500 for the next three months.
• Customers on pre-payment meters will have their charges brought into line with comparable direct debit charges.
• Free childcare of 30 hours a week for one- and two-year-olds will be introduced for working parents in England and will be fully implemented by September 2025.
• Fuel duty cut will be maintained and frozen for a further 12 months.
• The pension lifetime allowance will be abolished in a future Finance Bill.
• The pension annual allowance will be increased from £40,000 to £60,000.

 Public sector spending

• Day-to-day departmental spending will grow at 1% year on average in real terms from 2024/25.
• The Government is investing a further £47.2 million to improve HMRC’s capability to manage tax debts. This will allow HMRC to better distinguish between taxpayers who can afford to settle their tax debts but choose not to, from those who are temporarily unable to pay, ensuring taxpayers are offered the right support.

Investment zones

• 12 new investment zones will be created to drive growth in key sectors including green industries, digital technologies, life sciences, creative industries and advanced manufacturing.
• These zones will have access to a single five-year tax offer that matches that of freeports, consisting of enhanced rates of Capital Allowance, Structures and Buildings Allowance, and relief from Stamp Duty Land Tax, Business Rates and Employer National Insurance Contributions.
• They will also have access to flexible grant funding to support skills and incentivise apprenticeships, provide specialist business support and improve local infrastructure.

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