Spring Finance Bill 2023 published

• The Spring Finance Bill 2023 was published today (23 February) legislating for tax changes announced at the Budget.
• Bill delivers the Chancellor’s pro-business tax and employment measures to help grow the economy.
• Generous tax package for businesses worth over £27 billion to come into force on the 1st  April – UK capital allowances regime remains top of the OECD.

The Bill enshrines the Chancellor’s pro-business tax and employment measures announced at the Budget into law.

The measures in the Spring Finance Bill 2023 reward businesses that invest and innovate, recognising how they support growth.

They include two new major capital allowances – full expensing and a 50% First Year Allowance – worth £27 billion over the next three years and amounting to an effective £9 billion a year corporation tax cut for companies.

The Bill also includes pensions tax changes to support 15,000 doctors and other highly-skilled individuals to stay in work, as well as the Brexit Pub Guarantee, an increase in Draught Relief from August to ensure the duty on an average pint of beer at the pub does not increase. Tax incentives to help the creative sector and the new 50% domestic Air Passenger Duty rate are also featured in the Bill.

Financial Secretary to the Treasury Victoria Atkins said:

“This Finance Bill will drive forward our commitment to making the UK the best place to do business.

“It cuts corporation tax for businesses by £9 billion a year and is expected to boost investment by 3% helping grow the UK economy.”

With the new 25% corporation tax rate coming in for the top 10% most profitable companies from 1 April, to help get debt down after hundreds of billions in Covid-19 and energy bills support, and the super-deduction ending, the Chancellor used his Spring Budget to ensure that the UK’s tax system fosters the right conditions for enterprise, investment and growth.

Jeremy Hunt confirmed two major capital allowances – 100% full expensing and a 50% First Year Allowance – which ensures that the UK’s capital allowances regime continues to be the joint most competitive in the G7 and OECD. Together these are worth £27 billion over the next three years. An effective £9 billion a year corporation tax cut for UK businesses.

Full expensing lets taxpayers deduct 100% of the cost of certain plant and machinery investments from their profits before tax. It is available from 1 April 2023 to 31 March 2026. It provides the same generosity as the super-deduction, saving firms up to 25p in every £1 of qualifying investment and is for main rate assets – such as construction, warehousing and office equipment.

The 50% First-Year Allowance lets taxpayers deduct 50% of the cost of other plant and machinery, known as special rate assets, from their profits during the year of purchase. This includes long life assets such as solar panels and lighting systems.

The Office for Budget Responsibility predict together that these capital allowances changes will increase investment by 3% during each year it is in effect.

The Spring Finance Bill 2023 also delivers on the Prime Minister’s priority to cut NHS waiting lists so people can get the care they need more quickly, by removing tax-barriers that the medical community have made clear stop doctors working. On 6 April 2023, the pensions annual tax-free allowance will increase by 50% from £40,000 to £60,000, the Money Purchase Annual Allowance will rise from £4,000 to £10,000, and the Lifetime Allowance charge will be removed. The Office for Budget Responsibility estimate around 15,000 individuals will remain in the labour market as a result of the changes to the annual and lifetime allowances, many of whom will be highly skilled individuals, including senior doctors in the NHS.

As well as reforms to capital allowances and pensions tax, the Chancellor Jeremy Hunt announced other measures that are also featured in today’s Finance Bill to boost investment and get the economy growing. These include:

• Confirming an increase in Draught Relief to ensure the duty on an average pint of beer at the pub does not increase, and confirming duty rates for other alcohol will go up by RPI (10.1%) on the same day that historic alcohol duty simplification reforms and new reliefs take effect (1 August 2023). Only possible by leaving the EU.
• OECD Pillar 2 Global Minimum Tax rules in the UK – internationally agreed by 135 jurisdictions in October 2021 – will help protect the UK tax base against aggressive tax planning and reinforce the competitiveness of the UK by levelling the playing field for UK firms.

• Extending creative sector reliefs. Theatres, orchestra and museums and galleries will benefit from a further 2 years of tax relief rates of 45%/50%. The museums and galleries exhibitions tax relief sunset clause will be extended for a further 2 years to allow these organisations to fully benefit from the extension of the highest rates.

• Air passenger duty reforms. From 1 April 2023, a new domestic band will apply to flights between airports in England, Scotland, Wales and Northern Ireland, cutting APD by 50% to bolster UK connectivity. A new ultra long-haul band will also take effect, ensuring that those who fly the furthest, and have the greatest impact on emissions, incur the most duty.

The Bill received its first reading in Parliament on Tuesday 21 March, with the majority of measures coming into effect for financial year 2023-24. It will now follow the normal passage through Parliament.

Further information

• Even after April’s rate rise the UK has the lowest corporation tax rate in the G7.
• The Lifetime Allowance will be fully abolished in a future Finance Bill from April 2024.
• In 2019, the Royal College of Surgeons found that 69% of consultant surgeons have reduced their NHS hours because of the way pension taxes work.
• Our approach to business tax strikes the right balance between raising sufficient revenue from most profitable companies to support fiscal sustainability, whilst ensuring the tax regime drives business investment by providing generous tax incentives.
• The super-deduction announced in March 2021 was a capital allowance which let businesses write off 130% of the cost of certain capital spending against taxable profits, thus cutting their overall tax bill.
• The Finance Bill has been published here, accompanied by full Explanatory Notes in the usual way.
• The Overview of Tax Legislation and Rates (OOTLAR) document, published at Spring Budget 2023, confirmed the measures going forward in the Bill and can be read here.
• The Chancellor’s Budget statement can be found here.
• Spring Budget 2023 Media Factsheet: Cutting & Simplifying Tax for Businesses to Invest and Grow.