Spring Budget 2023 - Implications for Individuals

With the overall theme of growth, there were very few announcements in Spring Budget 2023 that will have an impact on the taxation of individuals, apart from some changes to pensions and to restrict gift relief to UK charities.

There are no new announcements of changes to tax rates and thresholds, most of which were confirmed at the time of the 2022 Autumn Statement and are not currently expected to change. It is notable that there was nothing new on capital gains tax, inheritance tax or on the rules for non-doms.

So overall, as expected there is a continuing period of stability for personal taxes for now.

As part of the Chancellor’s drive to encourage over 50s to re-enter the workforce, from 6 April 2023 the annual allowance (AA) for pension contributions will increase from £40,000 to £60,000. However, for higher income individuals with ‘adjusted income’ over £260,000 the AA is normally tapered and, depending on the level of income, can be reduced to £10,000. The lifetime allowance (LTA) (which is the overall limit on pension savings) is to be abolished in a future Finance Bill, with the lifetime allowance charge on ‘LTA excess’ benefits being removed from April 2023. Despite the abolition of the LTA, on retirement the maximum amount of 25 percent of a pension pot that can be drawn down without a charge to income tax will still be restricted (the precise details of this are complex). Individuals who may be impacted will wish to review their pension arrangements.

Charitable tax reliefs are to be restricted to UK charities only, with donations to charities located in the EU and EEA no longer qualifying for UK charitable tax reliefs from April 2024. From 15 March 2023 only charities subject to UK law can register with HMRC. This will impact individuals who claim higher rate relief on donations to such non-UK charities.   

Agricultural Property Relief (APR) and woodlands relief from inheritance tax will be restricted to property in the UK from 6 April 2024. Stewardship schemes are designed to encourage farmers to protect and enhance the natural environment. A consultation was published alongside the Budget considering the expansion of the definition of activities that qualify for APR to include such stewardship. This consultation also considers a tightening of the APR conditions for landlords to restrict 100 percent relief to situations where the tenant has an interest longer than eight years.

From April 2024 capital gains in respect of crypto assets will be separately identified on the Self-Assessment Tax Return. For those who hold crypto assets this highlights the importance of keeping good records of all transactions in such assets and ensuring that they are correctly reported to HMRC. 

To help start-ups and young companies the Government has confirmed a previous announcement that from 6 April 2023 the Seed Enterprise Investment Scheme (SEIS) will be expanded. The annual amount on which individuals can claim income tax and capital gains tax re-investment relief is doubled to £200,000. The qualifying company limits will also be increased, such that the amount a company can raise will increase to £250,000 and the gross assets test is increased to £350,000. The age limit for a ‘new qualifying trade’ is increased from two to three years.

The Government has confirmed that Social Investment Tax Relief (SITR) will close to any new investments from 6 April 2023. However, the limits that apply to funds that can be raised and deployed using the Community Investment Tax Relief Scheme (CITR) are to be expanded.

As in the past, there is reference to a further set of tax administration and maintenance announcements later in the spring, none of which will have an impact on the Government’s finances at this stage, or require legislation in the Spring Finance Bill which is due to be published on 23 March 2023.  

With a General Election on the horizon, and the Government’s need to demonstrate stability as it is gearing up towards putting together its election manifesto, it would appear that, for now at least, the stable period for personal taxes and in particular capital gains tax and inheritance tax continues. Individuals, their families and businesses may now wish to take stock of their current position to confirm that their future plans are still fit for purpose and meeting their longer-term objectives – their ‘Plan A’. With the possibility of a future change of Government it would also be an opportunity to consider if they should have a ‘Plan B’ in the event of possible future changes to capital taxes.