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As expected, there were no changes to headline tax rates or allowances in the Spring Budget by the Chancellor. The Chancellor has remained committed to his policy of boosting tax revenues through fiscal drag, particularly from higher earners and investors, and has in fact introduced very few personal tax changes with a few targeted exceptions.

Given the tumultuous times of 2022 have now passed we are beginning to see more landlords feel comfortable about finding the right properties to add to their existing portfolios. For first-time investors it is important to realise that the immediate outlook may still remain somewhat bleak but investing in property is still commercially viable if done as a medium to long-term investment and judging each property on it’s merits on a case-by-case basis to ensure that despite the lack of tax incentives you have a decent if not good return on investment. 

As always, good rental property is still a great asset to invest in for long-term gains, good income yield, and protecting wealth for future generations, in my experience. 

Key points from Spring Budget 2023

Here is a run-through of the main announcements in the Spring Budget:

• The UK is expected to avoid a recession this year but will experience a contraction of 0.2 percent in GDP in 2023
• The corporation tax rate will increase from 19 percent to 25 percent from April as planned. However, the Government will introduce full capital expensing, allowing companies to deduct all of their spending on IT equipment, plant, and machinery from their tax bills in the year of investment
• A new tax credit will be introduced for small and medium-sized firms that spend at least 40 percent of their expenditure on research and development (R&D)
• The Government has confirmed the establishment of 12 new Investment Zones

• From 1 August, duty on draught products in pubs will be 11p lower than in supermarkets
• The Government will boost mayors’ financial autonomy, starting with West Midlands and Manchester, which will be allowed to retain 100 percent of business rates
• Tax reliefs of 45 percent and 50 percent have been extended for theatres, orchestras, and museums
• The energy price guarantee has been extended, providing greater stability for consumers
• The Government will expand free childcare for working parents in England to cover one and two-year-olds, as well as, increasing the amount of childcare support available to people on Universal Credit
• Fuel duty will not be increased, with a 5p cut to be maintained for a further 12 months
• The pension lifetime tax-free allowance will be abolished, while the annual allowance will increase by 50 percent from £40,000 to £60,000. 
• Crypto Assets will be separately identifiable in self-assessment tax returns’ capital gains tax pages from 2024
• There will be a range of measures to tackle promoters of tax avoidance schemes

Personal Income Tax 

As previously announced, the government will decrease the additional rate threshold (ART) from £150,000 to £125,140 from 6 April 2023. The ART for non-savings and non-dividend income will apply to taxpayers in England, Wales, and Northern Ireland.

The government will also reduce the Dividend Allowance from £2,000 to £1,000 from April 2023, and to £500 from April 2024. 

Pensions

The Annual Allowance will increase from £40,000 to £60,000 from 6 April 2023 onwards for those wishing to contribute to a private pension to mitigate their tax liability. 

The Money Purchase Annual Allowance and the minimum Tapered Annual Allowance (TAA) will both be increased from £4,000 to £10,000.

The Lifetime Allowance (LTA) charge will be removed from 2023/24 onwards. For individuals who have previously reached the maximum lifetime limit of what they could contribute to their pensions they will now be eligible to add further contributions to their pensions without the fear of having to pay a LTA charge. 

Capital Gains Tax 

The Government has confirmed it is updating the way individuals are taxed during the transfer of assets between spouses and civil partners in the process of separating. 

Under the current rules, the no gain/no loss provisions only apply up to the end of the tax year of separation, after which transfers are treated as taking place at market value, 

From 6 April 2023 onwards, separating spouses or civil partners be given up to 3 years, after the year they cease to live together, to make no gain or no loss transfers of assets between one another. 

This will ease the worry about tax complicating what is bound to be a difficult process for couples affected.

Corporation Tax 

As previously confirmed, the planned increase in the Corporation Tax rate to 25% for companies with over £250,000 in profits will go ahead. 

Capital Allowances

Companies incurring qualifying expenditure on the provision of new plant and machinery on or after 1 April 2023 but before 1 April 2026 will be able to claim one of two temporary first-year allowances. These allowances are:

• a 100% first-year allowance for main rate expenditure – known as full expensing; and
• a 50% first-year allowance for special rate expenditure.

Tax Debt 

HMRC is owed around £48 billion in unpaid taxes. Last year, HMRC extended its existing Self-Serve Time to Pay (SSTTP) service to employers with PAYE debt. The Budget included further measures to enable HMRC to better manage outstanding tax debt. This includes investing a further £47.2 million over five years to enable it to:

• Better distinguish between taxpayers who can afford to settle their tax debts but choose not to and those who are temporarily unable to pay. This would enable HMRC to better tailor support for taxpayers with tax debts
• Enhance the existing ‘Time To Pay’ tool to allow more taxpayers to arrange payment plans online themselves
• Temporarily boost HMRC’s debt collection capacity

Anyone who owes HMRC money should proactively contact HMRC. Taxpayers can use the SSTTP or contact HMRC by phone to arrange to settle their debt in installments. It is important to avoid being contacted by the debt collection teams or third-party debt collection agencies.

Remember also that late payment interest on unpaid taxes accrues daily with the current interest rate at 6.5%.

If you found this article informative then why not read our tax guide to jointly owned property or about sharia mortgages next up?

Thandi Nicholls Ltd
Creative Industries Centre
Glaisher Drive
Wolverhampton
West Midlands
WV10 9TG