Money SavingSpring Budget 2023 - Capital Allowances, R&D Tax Credit and More

In this blog, we will discuss a summary of the 2023 spring budget in the following areas:

• Business Tax|Corporate Tax
• Personal Tax Relief
• Research And Development Tax Credit
• Indirect Taxes and Duties
• Other Measures Implemented
• What You Can Do To Keep Your Financial Stability
• Bottom Line

Business Tax And Using The Corporation Tax Calculator

What is a business tax or corporate tax? Corporation tax rates are defined as a tax paid on corporate profits. These profits come from the good management of your business. When it comes to corporate taxes, the Chancellor has confirmed that the main corporate tax rate will increase from 19% to 25% from 1 April 2023.

To see how much tax your business needs to pay based on its profits, use the Corporation Tax Calculator to see if your business profits are above the small companies limit and if you qualify for the marginal relief.

Capital Allowances

To encourage new investment, it was announced that all businesses can claim full tax relief on all capital expenditure on qualifying assets within three years, without restriction. For companies that will be taxed at 25%, this is equivalent to retaining the same level of relief currently available under the Super Deduction which expires on March 31, 2023.

While the super deduction will end on March 31, 2023, it will be replaced by full capital expensing for the next 3 years. Costing the Treasury around £9 billion, the aim was to make it as legally permanent as possible. 

This policy means that businesses can deduct 100% of their capital expenditure on new qualifying equipment, plant and machinery from their taxable profits immediately, rather than over several years. Assets must be new and the legislation excludes leases and cars. If you invest in second-hand assets, an annual investment limit of £1 million applies.

Personal Tax Relief

A big announcement is that from April 2024 the government will remove lifetime benefit limits for pensions. They want people to work longer, so they don’t want to limit how much people can pay into private pensions. Significant pension tax reforms have been announced as part of a series of measures to reduce economic inactivity:

• From April 2023, the amount individuals can contribute tax-free to their pension fund will increase from £40,000 to £60,000 a year.
• The government will endeavour to eliminate the lifetime allowance in future budgets. Currently £1,073,100.
• For those who have already retired, the total amount they can save tax-free under the Annual Defined Contribution Allowance will increase from £4,000 to £10,000 from April 2023.

Research And Development Tax Credit

Changes to the R&D tax credit for small businesses have been announced, with companies deemed to carry out intensive R&D activities eligible for the increased credit. As of 1 April 2023, higher relief rates will apply to loss-making R&D-intensive SMEs. SMEs with at least 40% of their total expenditure on qualifying R&D can claim an effective credit of 27 pence for every pound of qualifying R&D expenditure.

The government is still considering its response to the consultation on the merger of the RDEC and SME schemes and no decision has been made. A draft law on a possible combined R&D aid scheme will be published this summer.

Two new categories of eligible research and development expenses will be created for data licensing and cloud computing services. Also from now on, all R&D tax credit applications filed on or after August 1, 2023, must be filed using the new digital form, regardless of the relevant accounting period.

Indirect Taxes And Duties

Fuel Duty

Fuel duties will remain the same for the 13th consecutive year, and last year’s temporary 5% reduction will remain in place.

A planned 11p increase in fuel duty this year has been dropped, meaning the 5p cut introduced in the Spring 2022 Budget will remain in place for the next 12 months. This will save an average motorist about £100. That’s good news for motorists.

Alcohol Duty

There will be an increase in duty fees on imported beer, cider, wine and spirits. Duty on all alcoholic products brought into or imported into the UK will increase in line with the RPI.

The reduction for beer and cider products will increase from 5% to 9.2%, and for wine, spirits and other fermented products from 20% to 23%. These changes will come into effect on August 1, 2023.

Other Measures Implemented

Energy Bill Support

The home energy price guarantee will continue at the current rate for another three months until June 2023, capping typical home energy bills at £2,500 a year. The Energy Bill Relief Program to support businesses and other non-domestic energy users will be replaced by the Energy Bill Discount Program until March 31, 2024.

Use theenergy bill calculator to keep track of your energy usage.

The Returnship Of Seniors In The Workplace

The government is concerned about the large number of people over the age of 50 who have left the labour market permanently in recent years, often for reasons related to COVID-19. Measures will be put in place to try to encourage these people to return to work. These include new training courses for those over their 50s and the option of having a mid-life MOT to help assess their financial situation.

Expansion Of Free Childcare

If parents have children under 3 and work, they will receive 30 hours of free childcare for each child over 9 months. The Chancellor says it will cut childcare costs by 60% and encourage more parents to return to work.

This policy has been introduced for older children due to the limited number of places in UK nurseries. This can be a concern for many parents and may affect their ability to return to work.

The phases are as follows:

• From April 2024, working parents with 2-year-old children will be able to benefit from 15 out of 30 hours of free childcare.
• These 15 hours will be extended to all children from 9 months old until September 2024.
• From September 2025, parents who work with children aged 9 months to 2 years will be able to benefit from 30 hours of free childcare.

[h3]Help for people with long-term sickness or disabilities[h/3]

The government is launching a voluntary program called Universal Support to help people with disabilities find suitable work without fear of losing their benefits. A Work-well program will be introduced, which will help people with health problems to stay or work.

The Chancellor has confirmed that the work capacity test will be abolished and the government will begin to separate a person’s social rights from their capacity to work. Details on when this will happen have yet to be determined.

What You Can Do To Keep Your Financial Stability

In this economical financial crisis, there are many uncertainties. Trying to live within our means can be very difficult. To achieve financial stability, you need to spend less than you earn and put your money aside to save.

One can think: “Well that’s easier said than done,” but you can start laying the foundation for financial stability by creating a budget for housing and other needs, deciding how much to spend on your purchases and building your emergency fund. Following these simple steps can help you reach financial stability. Let us see how:

• Set Financial Goals - Building financial stability comes down to creating systems for spending, saving, and investing income. But before you start fantasising and developing specific habits, take the time to examine your overall financial situation and define your financial goals.
• Create A Budget - Cash flow control is an important first step in establishing financial stability. A budget is a plan for how the money will be spent in all areas of your financial life, such as necessary expenses, luxury purchases, debt repayment, personal savings goals, and retirement investments.Before setting a budget, remember that the best budget is the one you can stick to. For example, some people like a highly structured zero-based budgeting system, while others like the flexibility of a 50/30/20 budget, which allocates half of the income to necessary expenses and 30% to discretionary expenses. 20% to saving. Look for the best budgeting apps and see how you can plan.
• Prioritise Your Savings First - If you wait to pay your bills and shop to start saving, you may not have much left to save. Instead, you can better meet your savings goals by automatically transferring money into savings whenever you receive a payment – ​​in other words, pay yourself first.Start saving by opening a dedicated account, and setting up automatic transfers to the account regularly.
• Grow An Emergency Fund - Building emergency savings can help you survive financial crises, such as loss of income or major expenses, without going into debt. Knowing that you can cover expenses in an emergency can help you feel more stable and confident about your overall financial situation, so even if you’re lucky enough to never have to spend any money, the benefits of emergency savings cannot be overstated.
• Eliminate Your Debt - If you have high-interest debt, such as credit card balances or personal loans, paying them off as soon as possible can be very beneficial to your overall financial situation. Paying only the minimum repayments means paying more interest over time, and the money you spend on debt could work for you elsewhere. Try and squash these and be on your way to financial freedom.
• Check Your Credit Score - In addition to saving your money for the future, you need to monitor your credit score and ensure that your financial habits are in line with your credit goals as well. Building a score can help you achieve important financial goals, such as owning a home. It can also help increase your financial stability by qualifying for lower interest rates when you need to borrow money. Check your credit score with ClearScore for free and keep track of your financial habits.

Bottom Line

Achieving financial stability ultimately comes down to living within your means, saving leftover funds, and managing debt effectively. With the new projections on capital allowances, R&D tax credits, and personal tax relief that has been implemented to strengthen the UK economy, you can be sure that financial stability is possible.

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