The abolition of the pensions Lifetime Allowance, (LTA) which was announced in the Spring Budget, releases people to save as much as they like into their schemes.

Chancellor Jeremy Hunt abolished the allowance, which is the limit on how much people can build up in their pension pots over their lifetime while still benefiting from key tax incentives. The previous threshold was £1,073,100 and anything over that was subject to a tax charge of up to 55 per cent.

Necessary change

The Government had argued that the LTA change was necessary because too many highly paid professionals, including NHS consultants and GPs take early retirement, and there have been predictions that more and more older public and private sector employees would change their behaviour or retire early to avoid being hit by penalties.

The Chancellor also increased the Annual Allowance (AA), which is the total amount paid into your pension plans each year from all sources, before you have to pay additional tax charges, from £40,000 to £60,000. He has also increased the Money Purchase Annual Allowance (MPAA) and Tapered Annual Allowance (TAA) from £4,000 to £10,000, and the Adjusted Income for TAA from £240,000 to £260,000.

MPAA changes

Previously, if you accessed any taxable money from your pension plan you would see your allowance reduce from £40,000 to £4,000. This is a limit on how much people over 55 could pay into a defined contribution pension with tax reliefs, once they start drawing an income from their retirement pot.

The Chancellor has increased this from £4,000 to £10,000, which might be useful for anyone who dipped into their pension plan to help top up their income during the pandemic or while living costs are so high.

TAA changes

The TAA applies where an individual has a threshold income of £200,000 and adjusted income of £240,000 (adjusted income includes all pension contributions, while threshold income excludes pension contributions).

Where the TAA applies, an individual’s AA is reduced by 50p for every £1 over the adjusted income threshold, down to the minimum level. The minimum level has now been increased to £10,000.

Need help with understanding pension tax liabilities? Contact us.

Chancellor Jeremy Hunt has announced a partial replacement for the Super Deduction that allows companies to write off 100 per cent of the cost of investment in one go.

The Full Expensing scheme was announced in the March Budget. Businesses that invest in IT equipment and machinery will be able to claim back the cost by writing it off against tax on their profits, the Chancellor announced.

100 per cent claim

It will allow businesses to claim up to 100 per cent of the cost of the investment.

To further encourage investment after the pandemic, the Government first introduced the super-deduction in 2021.

Full Expensing came into effect in April 2023 and will be in place until at least March 2026.

Less generous

For every pound a company invests, they can get up to 25p in tax relief. This measure is designed to make the UK’s capital allowances system among the best in the world.

It is less generous than the Super Deduction, which allows firms to claim back 130 per cent on investment in areas such as machines for manufacturing.

Although the measure is due to last only three years, with the possibility of renewal, it is expected to cost the Government £10.7 billion a year by 2025.

There are different types of capital allowances available, including the Annual Investment Allowance (AIA), Writing Down Allowances (WDAs), First-Year Allowances (FYAs), and Structures and Buildings Allowances (SBAs).

For help and advice with full expensing and capital allowances, contact us today.

The Government has announced there will be greater scrutiny on the reporting of all crypto transactions, including for cryptocurrencies and non-fungible tokens (NFTs).

HM Revenue & Customs (HMRC) will now require cryptoasset reporting in Self-Assessment tax returns by requiring separate reporting of gains and income.

The changes will be introduced on the forms for the 2024-25 tax year.

Greater security

The heightened scrutiny of cryptoasset holders becomes more of an issue for taxpayers as a result of the reduction in the tax-free Capital Gains Tax (CGT) Annual Exempt Amount.

After a turbulent year, interest seems to have been renewed in digital currency after major problems in the traditional banking sector.

This saw the bailout of U.S. lenders Silvergate Bank, Silicon Valley Bank and Signature Bank, to be followed by Credit Suisse in Switzerland.

Crypto markets have bounced back in 2023, with a particular enthusiasm for AI crypto tokens and projects.

Tax relief

It is now crucial for investors to make sure they are reporting their crypto correctly, to get their tax right or to take advantage of valuable tax relief on any losses.

Investing in,  mining, creating or actively trading cryptoassets means you are likely to be generating taxable income or gains.

The new requirements will allow HMRC to check annual tax reporting against data they receive directly, for example from crypto exchanges and other trading platforms.

Crypto exchanges like Coinbase, Binance or Kraken have provided contact details of those trading in crypto assets for HMRC in recent years.

Disclose data

Under UK regulations, to have UK customers, these exchanges are expected to disclose user data to HMRC.

The rule change also affects crypto investors who have not accessed their cryptoassets.

HMRC says its view is that crypto is situated where the holder is a resident. This means that the remittance basis of taxation will generally not protect crypto gains or income.

Need advice with cryptocurrency and Self-Assessment? Contact us.

Changes to the amount of Corporation Tax (CT) businesses pay came into effect on 1 April.

From that date, the main rate of CT rose from 19 per cent to 25 per cent for the most profitable companies.

Companies whose year-end is 31 March will pay 19 per cent CT for the whole of the 2022/23 period, and then 25 per cent for the whole of the 2023/24 period.

Hybrid rate

However, for companies whose accounting period straddles 1 April, it will be necessary to apportion profits between those that arose up to 31 March and those that arose after 1 April.

Generally, the effective amount of Corporation Tax due will, however, rely on the taxable profits your company makes as follows:

• Small companies with profits of up to £50,000 will pay CT at 19 per cent
• Companies with profits of £250,000 and over will pay CT at 25 per cent
• Companies with profits over £50,000 but under £250,000 will pay on a sliding scale of between 19 per cent and 25 per cent.

Where companies have taxable profits between these two thresholds it is more complex as the rate of tax they pay will depend on their level of profit.

This is due to Marginal Rate Relief (MRR). This is a tapered relief, which increases in line with a company’s profits.

The basic method used by HM Revenue & Customs (HMRC) to calculate this relief is quite complex, so seek advice from your professional adviser.

Need advice on the rise in Corporation Tax and related matters? Contact us.

The Valuation Office Agency (VOA) has updated the rateable values of all businesses, and other non-domestic, properties in England and Wales from 1 April 2023.

The Government levies the charge on offices, shops, pubs, and warehouses. In fact, most non-domestic properties will attract business rates. They may also be charged where only part of a building is used for non-domestic purposes.

A Government business rates support package has been put in place worth around £13.6 billion over the next five years.

It includes measures to freeze the business rates multipliers at 49.9p and 51.2p in 2023-24, which, it is claimed, will see bills six per cent lower than they would have been without the freeze.

Changes to business rates in 2023:

• The multiplier represents the number of pence in each pound of the rateable value that will be payable in business rates before any relief or discounts are applied.
• A transitional relief scheme will cap bill increases caused by changes in rateable values at the 2023 revaluation.
• For retail, hospitality, and leisure business rates relief will be increased from 50 per cent to 75 per cent (up to £110,000 per business) in 2023-24.
• The increases are capped at £600 per year from April 2023 if businesses lose their eligibility for small business rates relief as a result of the revaluation.

The updated values reflect the property market as of 1 April 2021 and, while some sectors benefit, others have been hit hard by the Business Rates Revaluation 2023.

How are business rates calculated?

They will be based on the property’s ‘rateable value’, the estimated value on the open market.

The rateable value for your property is not what you pay in business rates or rent. Your council uses the rateable value to calculate your business rates bill.

What is the Small Business Rates Relief?

This applies if the property has a rateable value of less than £15,000, and generally if the business only uses one property:

• Full relief is available on properties with a rateable value of £12,000 or less
• For those between £12,001 and £15,000, relief goes down gradually from 100 per cent to zero per cent

If you’re a small business but you don’t qualify for small business rate relief, your bill will still be worked out using the lower small business multiplier (for properties with a rateable value below £15,000).

Need help with understanding business rates? Contact us today.

The Government has announced a shake-up in how Benefits in Kind (BIK) are paid. The move will allow tax agents to run payroll BIK on behalf of clients for the first time.

The Government says it will help to reduce administrative burdens on employers and enable agents to support their clients more effectively.

If an employer provides a taxable benefit, such as the use of a company car, the taxable benefit has to be valued. For most types of BIK, the law sets out how to work out the value, with tax paid on the taxable value of the benefit.

Report expenses

It is currently the duty of employers to report taxable expenses or benefits for employees to HM Revenue & Customers (HMRC) directly through payroll or at the end of the tax year. They are also required to report how much Class 1A National Insurance (NI) is owed on all the expenses and benefits provided and pay any outstanding NI.

The Chancellor announced in the March Budget a move to simplify the tax system for taxpayers and their agents, and will deliver IT systems to enable tax agents to payroll BIKs on behalf of employers.

Agents will be able to report expenses related to company cars, health insurance, travel and entertainment, and childcare.

Digital reporting

HMRC has already confirmed that it will require the minority of digitally capable employers who still submit forms reporting employee benefits and expenses on paper, to use online forms from April 2023.

It will then move to issuing P6 and P9 coding notices solely using digital methods.

Expenses and benefits for each employee do not have to be reported at the end of the tax year if all expenses and benefits are payrolled.

There are penalties for non-compliance if employers carelessly or deliberately give inaccurate information in a tax return that results in not paying enough tax or over-claiming tax reliefs.

Need advice on Benefits in Kind payments and other taxation matters? Contact us.

Just a few days short of the third anniversary of the first Covid lockdown, Chancellor Jeremy Hunt rose to the Despatch Box to deliver the first full Budget to have taken place in 504 days and the first unaffected by the immediate impact of the pandemic since October 2018.

Of course, in that time, we have had several fiscal statements and mini-Budgets, but never a full Budget Statement.

In contrast to the last full Budget, gone is the financial emergency of the Covid lockdowns, gone is the immediate fallout from the ill-fated Truss-Kwarteng mini-Budget of last Autumn, and gone is the immediate threat of a winter with households and businesses crippled by astronomical fuel bills.

Against a background of Brexit, Covid and domestic political instability, Jeremy Hunt will doubtless have been hoping that the first full Budget post-Covid would mark a return to a more normal footing for politics and the economy.

However, there was still plenty for the Chancellor to deal with. Inflation, exceptionally high fuel bills, stagnant growth, economic inactivity and the post-Covid damage to the public finances have not gone away.

Those were the areas the Chancellor was expected to set his sights on as he rose to his feet.

• OBR Forecasts and the Public Finances
• “Back to Work” Measures
• Cost of Living, Childcare and Fuel Bills
• Business Taxation
• Pensions
• Conclusion

OBR Forecasts and the Public Finances

The Chancellor began by describing his speech as a “Budget for Growth”, saying he would deliver on an aim to make the UK one of the most prosperous countries in the world by removing barriers to investment, tackling labour shortages, breaking down barriers to work and harnessing British ingenuity.

He said the Office for Budget Responsibility (OBR) expects inflation to fall from a high of 10.7 per cent in the final quarter of 2022 to 2.9 per cent by the end of 2023, achieving the Government’s aim of halving inflation.

The OBR no longer expects the economy to enter a technical recession, with the economy expected to shrink by 0.2 per cent during 2023, before growing by 1.8 per cent in 2024, 2.5 per cent in 2025, 2.1 per cent in 2026 and 1.9 per cent in 2027.

Moving to the public finances, the Chancellor said that public sector net debt is currently 100.6 per cent of GDP but is expected to fall to 94.6 per cent of GDP by 2027-28.

“Back to Work” Measures

The Chancellor said that there are currently one million vacancies in the economy and seven million adults of working age who are not currently employed. He said that encouraging more people from this group into the labour market would be vital for growing the economy.

He announced various measures designed to get people back to work, including reforms to disability and out-of-work benefits intended to remove certain constraints and disincentives to work.

He also noted that there are now three million working age people over the age of 50 who are not in work – a figure that has increased by more than 300,000 since the pandemic. To tackle this, he announced further career support for the over-50s and a dedicated program of apprenticeships to be known as “Returnerships”.

Meanwhile, the Chancellor said that five occupations in the construction sector will be added to the Shortage Occupation List, making it easier for employers to employ skilled workers from outside the UK.

Cost of Living, Childcare and Fuel Bills

Following an announcement earlier in the day, the Chancellor confirmed that the Government’s Energy Price Guarantee, which caps per-unit household energy bills, will remain in place for a further three months from April to June 2023.

The Chancellor said that this effectively continues to cap a typical household bill at £2,500 a year.

At the same time, he said that fuel duty will remain frozen and the existing temporary 5p cut will be retained for an additional year.

He also confirmed another significant measure that had been announced ahead of the Budget in the form of a commitment to extend the provision for 30 hours’ free childcare for the children of working parents to the parents of all pre-school children aged from nine months. These reforms will be phased in gradually from April 2024 to September 2025.

There will also be changes to staff-to-child ratios in nurseries and incentives for new childminders to encourage an increase in provision in the sector.

Business Taxation

The Chancellor announced two significant changes for businesses – the introduction of a new “Full Expensing” scheme to help mitigate the impact of April’s increase in the main rate of Corporation Tax, which he confirmed will go ahead, and further reforms to Research and Development (R&D) Tax Relief.

Full Expensing will be introduced from 1 April 2023, replacing the Super Deduction. It will allow companies to write off the full cost of qualifying plant and machinery investments in the year of the investment. The measure initially applies for three years but the Chancellor said he hoped to make it permanent “when fiscal conditions allow”.

The Chancellor announced a significant increase in the relief available to loss-making R&D intensive SMEs, which will now receive £27 from HM Revenue & Customs (HMRC) for every £100 of R&D investment.

The move has been prompted by reforms previously announced that will take effect from April 2023 that will reduce the rate of tax relief and tax credits available to some SMEs.

Additionally, the Chancellor announced the creation of 12 investment zones across the UK. Those in England will have access to funds worth £80 million over five years, with a five year tax offer equivalent to that available to Freeports.

The zones will be located in the East Midlands, Manchester, Liverpool, the North East, South Yorkshire, Tees Valley, the West Midlands and West Yorkshire, as well as in each of Wales, Scotland and Northern Ireland.

Pensions

Few Budgets come to pass without some sort of rabbit-out-of-the-hat moment and this one was no exception.

While it had been trailed that there would be a significant increase in the Pensions Lifetime Allowance from its current level of £1 million, in a surprise move the Chancellor announced that the Pensions Lifetime Allowance would be scrapped entirely from April 2023.

At the same time, he also increased the Pensions Annual Allowance from its current level of £40,000 up to £60,000 from April 2023.

Conclusion

This was in many ways a return to normality for a Budget following the upheavals of recent years.

Reforms to Pension Allowances in particular may mean that business owners and senior professionals will need to revisit their tax planning to take advantage of the increased ability to save into their pension pots.

Link: Spring Budget 2023

Landlords and potential investors need to be aware of imminent changes to energy efficiency standards for properties, which can attract hefty fines if not adhered to.

Changes to Minimum Energy Efficiency Standards (MEES) and Energy Performance Certificate (EPC) requirements, come into force on 1 April.

At the moment, for commercial properties, a tenancy cannot be granted to new or existing tenants if the property has an EPC rating of F or G, unless the property is registered on the Private Rented Sector (PRS) Exemptions Register.

But from 1 April, it will be an offence to continue to let or rent out a property if it does not have a rating of at least E, which will attract a fine.

Some exemptions

Fines range from 10 per cent of the rateable value for breaches of less than three months (minimum £5,000 to a maximum of £50,000) to 20 per cent of the rateable value for breaches over three months (minimum £10,000 to a maximum of £150,000). Additionally, the breach may be made public through entry in the PRS Exemptions Register.

Some exemptions may apply to the minimum E rating requirement, including a seven-year payback test, third-party consent, devaluation, and recently becoming a landlord.

Residential properties

Residential properties should already have the required E rating, but Government proposals mean that by 2025 they must be upgraded to a C rating or higher for any new lettings, and in 2028 it will also apply to any continuing tenancies.

All of this means landlords should start preparing to make sure their properties are up to the required standard by the time of the deadlines.

Not only is there the threat of penalties for non-compliance, but they must consider the costs of upgrading properties and the consequent loss of rental income if they are not up to standard.

Property owners will therefore need to be able to show that the property has an appropriate minimum EPC rating of E in place and that all the relevant energy improvements that can be made have been completed.

For help and advice on related matters, contact us today.