Low-key Budget brings pension tax reform
The 2023 Spring Budget was expected to be relatively quiet on tax measures, and this was largely the case. However, there were still some announcements to take note of. What were the highlights?
The Chancellor’s Spring Budget speech largely focused on incentives to work for parents, older people, and carers, rather than on tax measures. The corporation tax increase from 1 April 2023 (first announced in 2021) was confirmed, and the main rate will be 25% after that date.
However, there were major announcements relating to pensions. Currently, individuals are subject to two thresholds with tax charges imposed where these are exceeded. The first is the annual allowance (AA), which is the maximum amount tax relieved contributions that can be made in a pension input period (which coincides with the tax year). This has been set at £40,000 for a number of years. The AA will increase to £60,000 from 2023/24. The second threshold is the Lifetime Allowance, which was £1.073M. It was widely rumoured that this would increase to £1.8M in an effort to dissuade those with high pension savings from taking early retirement to avoid tax charges. Instead, the LA charge has been removed for 2023/24, and will be scrapped altogether from 2024/25. The money purchase annual allowance (MPAA) will increase from £4,000 to £10,000 from 2023/24. This replaces the AA in some situations where an individual has already accessed pension savings, so may benefit people coming out of retirement.
For businesses, the system of capital allowances is being reformed. From 1 April 2023 until 31 March 2026, companies will be entitled to claim a 100% first year allowance for capital expenditure on IT equipment and plant and machinery. The 50% deduction that was introduced for special rate expenditure alongside the super deduction will be extended through this period. A consultation on expanding the cash basis for unincorporated businesses has also been announced, which could lead to relaxations of the restrictions on loss relief and the cap on deductible interest payments (currently £500).
A full overview of the announcements is available here.
Related Topics
-
Tribunal rejects reliance on adviser as reasonable excuse
A recent First-tier Tribunal decision has confirmed that relying on an accountant does not automatically amount to a reasonable excuse for missing a self-assessment deadline. The case highlights the limits of delegating tax responsibilities. What does this mean in practice?
-
HMRC issues new wave of offshore “nudge” letters
HMRC has issued a further round of “nudge” letters targeting individuals it believes may have undeclared offshore income or gains. The letters form part of HMRC’s ongoing use of data from international information exchange agreements. What should you do if you receive one?
-
Payroll changes for 2026/27
As the end of 2025/26 draws closer, HMRC has published a raft of updates and reminders for employers. Which changes do you need to be aware of that might impact your payroll in 2026/27?
This website uses both its own and third-party cookies to analyze our services and navigation on our website in order to improve its contents (analytical purposes: measure visits and sources of web traffic). The legal basis is the consent of the user, except in the case of basic cookies, which are essential to navigate this website.