Hunt for growth and growth for Hunt: Spring Budget 2023 tax analysis

/ 16 March 2023

Anthony Newgrosh

This is our focus on tax measures announced in Spring Budget 2023: both the headlines and the small print. Our overview of the Budget’s key tax announcements is available here.

Pension Lifetime Allowance

The main headline-grabber has been the abolition of the pension Lifetime Allowance (‘LTA’).  In the days before the Budget, the possibility of an increase was widely leaked: but no-one saw the complete abolition coming.

Although billed as a measure to encourage people to remain in the workplace or lure early retirees back to economic activity, the real motivation of the abolition (and of the increase – to £60,000 – in the annual allowance) was to remove the tax charges arising to high-earning members of defined benefit pension schemes (typically but not exclusively NHS consultants) as the notional value of their pension arrangements reached stratospheric levels.  Other taxpayers who are now able to accrue pension pots of unlimited value are essentially collateral beneficiaries.  Note however that the ‘tax-free lump sum’ remains capped at 25% of the current LTA.

Of course, whether the increased limits will have the effect of increasing or maintaining economic activity among the silver-haired rather than having the opposite long-term effect of allowing earlier retirement with increased pension provision remains to be seen: the increase from 55 to 57 (from 2028) of the age at which personal pensions can normally be drawn, announced in 2020, may prove to be more effective in securing the Chancellor’s objective.

Perhaps the most likely effect of removing the LTA will be the increased use of pensions as Inheritance Tax (‘IHT’) shelters – though whether the favoured IHT status of pension funds would survive under a future Labour government must be open to question.  Indeed, Labour are already on record as committing to reintroducing the LTA (though apparently not for NHS doctors – an interesting policy conundrum).

Childcare support

If encouraging older people (back) into work is one theme of the Budget (remember the Budget also introduces ‘returnerships’ – a sort of apprenticeship for the over-50s), encouraging mothers to return to the workplace is also front and centre of the policy.  Admittedly the full benefit of enhanced childcare provision from the age of nine months will have to wait until September 2025 (by which time there will have been a general election) but this is probably unavoidable given the need to expand the sector to accommodate the extra demand.  Meanwhile, the Government will make a start with 15 free hours of childcare a week for two-year-olds from April 2024.


A couple of interesting changes to Capital Gains Tax (‘CGT’) are buried in the small print.

First, as to deferred completion.  When contracts are completed in a tax year later than that in which they are entered into, the effect is (in most cases) to deem a disposal to have occurred in the earlier year.  That look-back rule has always presented difficulties for HMRC, since by the time completion occurs the time limit for assessing the earlier year may have passed.  The rule is now being changed to make the assessing time limit run from completion – but only for contracts entered into from April 2023: for existing contracts the problem (or opportunity, depending on your viewpoint) remains.  Remember, however, that where a deemed disposal in an earlier year is assessed, interest on the tax will run from the due date for that earlier year, which may be painful.

A second CGT change affects non-UK domiciled taxpayers.  This will counter avoidance by providing that where shares in a UK company are exchanged for shares in a non-UK company on a takeover, the new shares cannot benefit from ‘remittance basis’ if both companies are close companies (or would be if UK-resident) in which the individual in question holds more than a 5% interest.  It doesn’t affect the more common case of a foreign-domiciled entrepreneur selling his or her UK company in return for equity in a publicly-quoted overseas acquirer: UK and overseas tax treatment of such cross-border disposals can continue to be attractive.

Capital allowances: full expensing

The Chancellor made much of ‘full expensing’ of capital expenditure on plant and machinery by the introduction, for the next three years, of first-year allowance (‘FYA’) at 100% for ‘main rate’ expenditure and 50% for ‘special rate’ expenditure (which includes ‘integral features’ of buildings and most cars).  The full story is both a bit more and a bit less exciting than it appears.

Most businesses are already able to claim full write-off of most such expenditure (with the exception of most cars) under the Annual Investment Allowance (‘AIA’).  This (previously set to expire on 31 March 2023) is now to be made permanent at £1m per year (with appropriate apportionments between, broadly, related businesses).  This is said by Mr Hunt to result in full tax write-off for 99% of businesses: so it’s principally larger companies, spending more than £1m a year, who will benefit from FYA – and it is only companies that get FYA (not individuals or partnerships).  One business structure that gets somewhat left behind is a partnership or LLP with one or more corporate members – such businesses have never qualified for AIA and don’t qualify for the new FYA either.


There are some changes to the rules on the Seed Enterprise Investment Scheme (‘SEIS’): all the limits are increasing with effect from 6 April 2023:

  • The amount a company can raise will increase from £150,000 to £250,000;
  • the limit at the date of share issue on a company’s gross assets will increase from £200,000 to £350,000; and
  • the annual limits that apply to the investment amount on which individuals can claim income tax and CGT reinvestment reliefs will increase from £100,000 to £200,000.

The scope of the SEIS is also expanded a little – the age limit of a company’s ‘new qualifying trade’ increases from two to three years.

There are a couple of small simplifications to the administration of Enterprise Management Incentive (‘EMI’) option schemes.  More fundamentally, the deadline for notifying EMI options to HMRC increases (from 6 April 2024) from 92 days after grant to 6 July following the end of the tax year.

There are also some changes to the Company Share Option Plan (‘CSOP’).  The tax advantages of CSOPs don’t match those of EMI but it has its own attractions, and the changes extend the circumstances in which it may be worth a second look.

Cash basis accounting

Finally, most small unincorporated businesses (the annual turnover limit is currently £150,000 or in some circumstances £300,000) can considerably simplify their tax affairs (albeit at a cost of potentially missing out on some reliefs) by computing taxable profits on a cash basis.  There is to be consultation on the expansion of cash basis accounting, including possible increase of the turnover limit or even making it the default treatment.  Meanwhile, eligible businesses who value simplicity above all else should consider whether cash basis is right for them.

For more information on the Spring Budget 2023 announcements and how they may affect you, please get in touch with your usual BKL contact or use our enquiry form.

Our tax specialists also explore the Budget in this video:

BKL tax consultant David Whiscombe has also written for Tax Journal on the impact of Spring Budget 2023 on SMEs.

Anthony Newgrosh

Partner, Head of Business Tax

T +44 (0)20 8922 9144
E anthony.newgrosh@bkl.co.uk

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