In this article, I will highlight some of the key points from the budget, including changes to tax rates and new incentives for businesses. I hope you find this summary helpful, please don’t hesitate to reach out if you have any questions or concerns.
Full Expensing to replace the Super Deduction
This policy will replace the Super Deduction tax break, which was announced in the previous budget and finished on 31st March 2023.
Under Full Expensing, companies will be able to deduct the full cost of qualifying investments in new and unused assets such as machinery & equipment from their taxable profits in the year they are incurred. This means that businesses will receive an immediate tax benefit, rather than having to spread the deduction over several years.
The annual investment allowance (AIA) which also provides a 100% allowance for qualifying assets continues to have a limit of £1million and does also cover second hand assets, because of this the full expensing is only likely to benefit those businesses who exceed the £1million annual limit due to the ongoing availability of AIA.
Cars are not qualifying assets for either of these reliefs, but new electric cars do still qualify for a 100% first year allowance.
Corporation Tax Rates
The increase in the full rate of corporation tax to 25% is still to go ahead with the small profits rate continuing at 19%.
I will be writing a separate article regarding these changes shortly. The article will also include some additional information regarding the impact of the tax changes on the way business owners are remunerated.
Pension Changes
With increasing corporation tax rates, there were some welcome changes to the pension rules including increasing the annual allowance from £40,000 to £60,000. Furthermore, the lifetime limit which was previously £1,073,100 has been abolished.
Under the previous rules, individuals who exceeded the lifetime allowance faced a tax charge on the excess amount when they accessed their pension, either as a lump sum or as income.
EMI Share Options
From 6 April 2024, the government will extend the deadline for notifying an EMI option from 92 days following grant to the 6 July following the end of the tax year.
Please see this link for additional information on EMI schemes and how they can be used to retain your best employees.
Research & Development
From 1 April 2023, a higher rate of relief for loss-making R&D intensive SMEs will be introduced. SME companies whose qualifying R&D expenditure constitutes at least 40% of their total expenditure will be able to obtain an effective credit of 27p for every £1 of qualifying R&D expenditure.
Summary
Overall, whilst there were not too many significant changes, the pension changes, including the abolition of the lifetime limit, are likely to please many people. Additionally, the changes to the EMI share options scheme may encourage more SMEs to use this tax-advantaged scheme to attract and retain talent.
