Jeremy Hunt’s Autumn Statement speech last November was a largely uneventful affair, from a tax perspective, with the focus on freezing allowances and bands so as to raise future tax revenues. Yesterday’s “Budget for growth” followed suit in some respects, however those announcements that were made included some surprises, most notably the introduction of the so-called “full expensing” capital allowances regime and the abolition of the pension lifetime allowance.

Capital allowances

For most businesses, the most noteworthy announcement was the introduction of a new investment allowance that would allow companies incurring qualifying expenditure on the provision of new plant and machinery between 1 April 2023 and 1 April 2026 to claim one of two temporary first-year allowances:

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

These new allowances are aimed at making it considerably more attractive for a company to invest in a new building or in new machinery and, according to the Chancellor, is “a corporation tax cut worth an average of £9bn a year for every year it is in place.”  For many businesses this will go some way towards offsetting the increase in the corporation tax rate from 19% to 25% from 1 April 2023, which is expected to generate an extra £18 billion per year for the Treasury.  

As a reminder, the increase in the corporation tax rate to 25% will affect businesses with profits of more than £250,000, while those with profits of between £50,000 and £250,000 will get marginal relief.  Those with profits of less than £50,000 will see no change and will continue to pay corporation tax at 19%.  The Chancellor claims just one in ten companies will pay the full 25% rate.


For individuals, the most unexpected announcement was the removal, with effect from April 2023, of the lifetime allowance charge with the view to abolish the lifetime allowance entirely from April 2024 (which is currently just in excess of £1m).  This is in addition to an increase in the annual pensions tax free allowance from £40,000 to £60,000. Removing the maximum amount that workers can put into their pension pots before they are taxed (instead of simply raising the threshold) is part of the Chancellor’s plan to entice some of those who took retirement early to come back to work and will be seen by many as a welcome response to concerns that pension taxes have prompted many medical clinicians, in particular, to quit early.  The Chancellor stated that the change would result in 80% of NHS doctors no longer having to pay taxes on their pensions.

The pensions announcements formed part of a wider theme of attempting to encourage more individuals back to the workforce. Perhaps the most headline-grabbing non-tax announcement being that, by September 2025, working parents of children between the age of nine months and five years in England will be entitled to 30 hours of free childcare a week – a scheme which previously only applied to families with three and four-year-olds. 

Other matters

The previously announced freeze on the personal allowance and higher rate income tax threshold and National Insurance thresholds until April 2028 will go ahead despite record tax receipts over the past year. Likewise, the inheritance tax (“IHT”) “nil-rate band” (i.e. the tax-free amount before tax is due at a rate of 40%) will also stay frozen at £325,000, with the excess being charged to IHT at 40%. The additional rate income tax band threshold however will be reduced from £150,000 to £125,140 from April 2023. In the context of high inflation and associated rising wages the combined effect of these measures is that more people will pay more tax.

Other key measures worth noting that were previously been announced and will be legislated for in the Spring Finance Bill 2023 include:

  • As announced at Autumn Statement 2022, the government will legislate in Spring Finance Bill 2023 to implement the globally agreed G20-OECD Pillar 2 framework in the UK. The government will:
    • introduce a multinational top-up tax which will require large UK headquartered multinational groups to pay a top-up tax where their operations in a foreign jurisdiction have an effective tax rate of less than 15%. The measure would also apply to non-UK headquartered groups with UK members that are partially owned by third parties or where the headquartered jurisdiction does not implement the Pillar 2 framework.
    • introduce a supplementary domestic top-up tax which will require large groups, including those operating exclusively in the UK, to pay a top-up tax where their UK operations have an effective tax rate of less than 15%.
  • These changes will apply to large groups with over €750 million global revenues and will take effect in relation to accounting periods beginning on or after 31 December 2023.  More detail can be found here.  This is no doubt something that our Governments across the Crown Dependencies will be keeping a close eye on as they move closer to the point at which they will need to make a decision as to whether and how equivalent rules are introduced locally.
  • As announced in the Edinburgh Reforms on 9 December 2022, the government will legislate in Spring Finance Bill 2023 to amend the REIT regime in an attempt to enhance its competitiveness. More detail can be found here.
  • As announced on 20 July 2022, the government will legislate in Spring Finance Bill 2023 to amend the Qualifying Asset Holding Companies (“QAHC”) rules so that the conditions that must be met by a company to qualify as a QAHC better align with the intended scope of the regime and the rules better achieve their intended effect. Changes will variously take effect from Royal Assent of Spring Finance Bill 2023, 20 July 2022 and 15 March 2023, or are deemed to have always had effect. More detail can be found here.

Finally, it was confirmed that there will be a “Tax Day” next month on which we can expect details of consultations and other tax policy updates – we will keep you posted on this in due course.

KPMG comment

This was another quiet UK fiscal event from a Crown Dependencies perspective with perhaps more to be said about what was not announced than what was, for example there was nothing new in respect of the tax position of non-domiciliaries and the remittance basis, nor any major developments in respect of capital gains tax or IHT. With a UK election not too far over the horizon, it is looking increasingly likely that any more radical changes will be kept in abeyance for a little while yet.