Capital gains tax
Changes to capital gains tax (CGT) were announced in the Autumn Statement 2022 and came into effect from 6 April 2023. From April 2023, the annual exemption will reduce from £12,300 to £6,000 and from April 2024 and thereafter, the annual exemption will be reduced to £3,000.
CGT is payable on the profit (the difference between the value of the goods when acquired and when sold) when selling certain assets, such as land and property (including second homes), shares, art and antiques. CGT also applies when administering an estate.
The Spring Budget also contains changes to rules applying to the transfer of assets between spouses and civil partners in the process of separating. These changes came into effect on 6 April 2023. Find out more about this here.
The government intends to restrict charitable tax relief to UK charities under the control of a relevant UK court and community amateur sports clubs from April 2023.
There will be a transitional period until April 2024 for European Union (EU) and European Economic Area (EEA) charities that HMRC previously accepted as qualifying for charity tax relief. However, for any such charity that has not already asserted its status as a charity, this measure took effect from 15 March 2023.
For charities that do qualify and have asserted their charitable status before 15 March 2023, the transitional period is as below:
- Access to relief is extended to 1 April 2024 from 15 March 2023 for corporation tax, VAT, IHT, stamp duty, stamp duty reserve tax, stamp duty land tax (SDLT), annual tax on enveloped dwellings and diverted profits tax.
- Access to relief is extended until the 2024/2025 tax year from 15 March 2023 for income tax and capital gains tax.
Changes to pensions tax came into force on 6th April 2023. The changes will allow people to pay more into their pensions and draw more out of them without paying tax.
- The lifetime allowance (LTA), which allows up to £1.7 million to be drawn from a workplace or personal pension over a lifetime without a tax liability, is to be abolished. However, the LTA will continue to exist for the purpose of capping the 25% tax-free lump sum available when first accessing a pension. So, the maximum tax-free lump sum that can be drawn will be £268,275, unless there is pension protection, when the maximum lump sum is 25% of the protected amount.
- The annual allowance (AA) is the amount that can be paid into a pension each year without creating a tax liability. This will increase from £40,000 to £60,000.
- The tapered annual allowance is the reduction in the annual allowance for higher earners. The minimum tapered allowance will increase from £4,000 to £10,000.
- The money purchase annual allowance (MPAA) is the amount that can be paid into a new pension after retirement. This will increase from £4,000 to £10,000.
Agricultural property relief
Agricultural property relief (APR) allows you to pass on certain land without having to pay inheritance tax. Currently, it can be claimed on such property in the UK, Channel Islands, Isle of Man or a state within the EEA. From 6th April 2024 APR can only be claimed on such property that is within the UK.
There is also a call for a consultation to explore the expansion of APR to cover selected types of environmental land management.
Following decisions made in the Autumn Statement, Income Tax and National Insurance are to maintain the current thresholds at 2023-24 levels until April 2028. Find out more about those thresholds here.
As announced in the Autumn Statement 2022, inheritance tax will remain at current thresholds until April 2028.
The proposed 11 pence rise in fuel duty is cancelled. The current fuel duty will remain for a further 12 months.
Air passenger duty
Two new air passenger duty bands have been created. From 1 April 2023, the new domestic band will cover flights within the UK and there is an ultra-long-haul band for flights to countries whose capitals are more than 5,500 miles away from London. The domestic fee will be £6.50 for the lowest class of travel and the ultra-long-haul fee will be £91 for the lowest class of travel.
From 1 August 2023, the tax on draft beer in pubs will be 11p lower than alcohol bought from supermarkets.
OTHER MEASURES FROM THE SPRING BUDGET
By September 2025, working parents in England will be able to access 30 hours of free childcare per week for 38 weeks of the year. The childcare will be available from when a child is nine months old to when they start school. Where parents need to cover more than 38 weeks a year, they should be able to spread the entitlement over a higher number of weeks. The childcare package will become available in phases as follows:
- April 2024 – working parents of two-year-old children will be able to access fifteen hours of free childcare per week.
- September 2024 – working parents of children from nine months old to three years old will be able to access fifteen hours of free childcare per week.
- September 2025 – working parents of children from nine months old to three years old will be able to access thirty hours of free childcare per week.
Universal credit for childcare will also be paid upfront when parents are moving into work or increasing their work hours. This change is intended to remove a barrier faced by many when deciding whether, or how, to return to work.
To prevent working parents from reducing their working hours, schools and local authorities will also be funded to provide wrap-around care, so parents of school-age children will able to access childcare in schools between 8 am and 6 pm.
Support for the long-term ill and disabled
New policies to be implemented to help long-term ill and disabled people into work include:
- Abolition of the work capacity assessment to allow disabled benefit claimants to find employment without the risk of losing their financial support.
- Funding for 50,000 places per year on a voluntary employment scheme for those with disabilities, budgeting £4,000 per person to help disabled people find appropriate jobs and put the necessary support in place.
- The ‘WorkWell’ pilot programme, supporting individuals with health conditions into employment, combining health and employment support.
- A new universal support program, matching individuals with disabilities and long-term sickness to existing job vacancies and ensuring the necessary support to enter and remain in employment is in place.
Trusts and estates
Previous proposals to simplify trusts and estates will go ahead from the 2024 – 2025 tax year. These are:
- Trusts and estates with income up to £500 will not pay tax on that income with some exceptions. Where settlors have made other trusts, the amount is divided by the number of trusts to a minimum of £100.
- The default basic rate and dividend ordinary rate of tax that applies to the first £1,000 slice of a discretionary trust income is to be removed.
- Currently, the first £1,000 of income of discretionary trusts is taxed at 20% and any other income is taxed at the higher rate of income tax. The £1,000 bracket is to be removed, so all income is to be taxed at the additional rates of tax: currently 45% for non-savings income and 39% for dividend income.
- Beneficiaries of estates in the UK will not pay tax on income distributed to them, within the £500 limit for the personal representatives.
The energy price cap of £2,500 for domestic energy supplies was due to be removed at the end of March 2023. This has been extended to the end of June, when the cap will increase to £3,000.
This is a pilot scheme to help upskill and retrain workers over the age of 50. Their previous experience and flexibility will qualify to reduce necessary training time. Sector-based Work Academy Programme placements, skills boot camps and accelerated apprenticeships will be promoted to the over 50s. 8,000 skills boot camp places in England in 2023/2024 and 40,000 new sector-based Work Academy Programme placements in England and Scotland in 2023/2024 and 2024/2025 will be supported by an additional £63 million funding.
You can read the full Spring Budget 2023 here.