Spring Budget March 2023

By: |Published on: Mar 15, 2023|Categories: Contractor|

Budget measures March 2023

As a reminder the personal allowance, personal tax rates, national insurance rates and capital gains tax rates remain unchanged from 2022-23.  Company car tax rates are unchanged.  The full list of rates and allowances can be seem online with HMRC 

The Chancellor has increased the pension contribution annual allowance amount from £40,000 to £60,000 and removed the limit on pension fund size.  This will help higher earning employees and also those on final salary schemes to avoid a tax clawback on pension contributions.

Dividend Allowance

This will be reduced from the current £2,000 to £1,000 from 6 April 2023 and down to £500 from April 2024.  The rate remains 8.75% on basic rate profits and 33.75% on higher rate profits.

Capital gains allowance

This will be reduced from £12,300 to £6,000 from 6 April 2023 and down to £3,000 from April 2024.

Corporation tax

In the Finance Act 2021 the Government increased the standard rate of corporation tax to 25%.  This is coming in on 1 April 2023.  The new rules are:

Taxable profits less than £50,000 continue to be taxed at 19%

Taxable profits of more than £250,000 will be taxed at 25%.

Taxable profits falling into the middle, between £50,000 and £250,000 will be taxed at 25% with a marginal rate reduction equal to 3/200.

This is best illustrated using some examples:

  1. Company A has profits chargeable to corporation tax of £45,000.  The company will pay 19% tax of £8,550
  2. Company B has profits chargeable to corporation tax of £180,000.  The company will pay tax of £43,950 (being £180,000 x 25% = £45,000 less marginal rate reduction of £1,050 (£250,000-180,000 x 3/200)
  3. Company C has profits chargeable to corporation tax of £300,000.  The company will pay tax at 25% of £75,000

These bands are sub-divided if you own more than one company, so for instance, a trading company and a property company.

Capital expenditure

For the last two years expenditure on capital assets (items that have an enduring benefit for the business) have largely qualified for a super-deduction of 130% of the cost.  This is coming to an end on 1 April 2023 for companies and 6 April 2023 for the self-employed.  In future the deduction will be for 100%, or in the words of the Chancellor, fully expensed.

If you want further information on then please contact Clearways Acocuntants.