The key measures announced on Friday ranged from changes to the capital allowances regime, to confirming that the corporation tax increase will not go ahead to tinkering with Stamp Duty Land Tax thresholds for residential properties, amongst others.
The main changes are as follows:-
- The cancellation of the already legislated for increase to the main rate of Corporation Tax (“CT”) from 19 percent to 25 percent. The planned increase in the rate of Diverted Profits Tax from 25 percent to 31 percent from April 2023 was also cancelled;
- The Annual Investment Allowance (“AIA”) will be set at £1 million permanently. This was originally raised from £200,000 as a temporary measure which was due to end on 31 March 2023. The Institute recommended that the AIA, as a minimum, remain at £1 million until at least the end of this decade in its response to the HM Treasury consultation “Potential Reforms to UK’s Capital Allowances Regime”;
- The reduction in the basic rate of income tax from 20 percent to 19 percent will now take place one year earlier from 6 April 2023. Unexpectedly, the additional rates of income tax will be abolished from the same date. This will also be accompanied by changes to the dividend tax rates including reversing the 1.25 percent increase which took effect from 6 April 2022;
- There will be a four-year transition period for gift aid relief to maintain basic rate relief at 20 percent until April 2027;
- The Stamp Duty Land Tax (“SDLT”) 0 percent threshold doubled from £125,000 to £250,000. The level at which first-time buyers start paying SDLT increased from £300,000 to £425,000 and first-time buyers relief is now available on property purchases up to £625,000. These changes all took effect for purchases of residential property in England and Northern Ireland on or after 23 September 2022. HMRC has also published information on how these changes interact with the additional 3 percent SLDT surcharge for purchases of additional residential properties, the additional 2 percent surcharge for non-residents; and linked transactions; and
- The introduction of new investment zones where enhanced tax reliefs will be offered for SDLT, Enhanced Capital Allowances, Structures and Buildings Allowance and Employer National Insurance Contributions (“NICs”). The Government intends to work with the devolved administrations and local partners to make sure all regions benefit; if they are willing to do so.
Further measures were also announced designed to encourage investment. These were as follows:-
- From 6 April 2023, an expansion of the Seed Enterprise Investment Scheme by doubling the annual investor limit from £100,000 to £200,000 and increasing the gross asset limit of the investee company to £350,000. This is also expected to be accompanied with changes aimed at “making it easier for investors to claim tax reliefs”;
- The Enterprise Investment Scheme and the Venture Capital Trusts Scheme will both be extended beyond 2025;
- From 6 April 2023, changes to the Company Share Option plan scheme by increasing the employee share option limit from £30,000 to £60,000 and removing a condition which limits the types of shares eligible for inclusion within the scheme;
- The introduction of a new VAT free shopping scheme for non-UK visitors via an online scheme “as soon as possible”. Northern Ireland is not expected to be included in this scheme;
- The repeal of reforms to the Off-Payroll Working rules (IR35) introduced in the public sector in 2017 and extended to medium and large-sized organisations in the private and voluntary sectors in 2021. From 6 April 2023, workers providing their services via an intermediary will be responsible for determining their employment status and paying the correct amount of tax and NICs; and
- A freeze on Alcohol Duty rates from 1 February 2023. Further details of the Government’s reforms to alcohol taxation are still to come and more information on Friday’s announcements is available.