The Chancellor spoke for about an hour (on Wednesday 15th March) and said that in November he had delivered stability and today he was focused on growth. He opened by saying the economy is performing better than expected and that the OBR judge the UK will not enter a technical recession this year. He also said the OBR forecast that inflation in the UK will fall from 10.7 per cent in the final quarter of last year to 2.9 per cent by the end of 2023.
Levelling Up
To level up growth across the UK and spread opportunity everywhere, local communities will be empowered to command their economic destiny. The Budget also announces over £200 million for 16 regeneration projects in England, which may provide investment opportunities for innovative and entrepreneurial landlords.
Pension reform
Reform of the pension threshold Annual Allowance, increasing it from £40,000 to £60,000 from 6 April 2023. Individuals will continue to be able to carry forward unused Annual Allowances from the three previous tax years, whilst the £1m lifetime allowance on a tax-free pension contribution will be scrapped from April 2024.
Personal Tax allowance
In case you missed it the new personal tax allowance for England and Northern Ireland from 6 April 2023 to 5 April 2024 is. £12,570 per year (same as previous tax year) In real terms, the personal tax allowance has not increased in line with inflation.
Taxable income (2023-2024)
Source: www.Gov.uk, 2023
Change in Corporation Tax
The 6% increase in the corporation tax will take the rate from 19% to 25% on 1 April.
- 19% for taxable profits below £50,000 (small profit rate)
- 25% for taxable profits above £250,000 (main rate)
However, the good news is that companies with taxable profits below £50,000 (small profit rate) will still only pay 19%. Companies with taxable profits between £50,000 and £250,000 may pay lower corporation tax through marginal Relief.
What is Marginal Relief?
Marginal Relief provides a gradual increase in the Corporation Tax rate between the small profits rate and the main rate — this allows you to reduce your rate from the 25% main rate. For more information, visit – Marginal Relief for Corporation Tax – GOV.UK (www.gov.uk)
How Marginal Relief Works (Example figures)
*Marginal rate relief Formula (Adjusted upper limit – taxable profit including distributions) × (taxable profit ÷ taxable profit including distributions) × (Marginal Relief fraction)
Unintended impact on the Mortgage Industry
The Spring Budget seemed to be fairly light touch for the property market. The announcements around encouraging more people to work longer bear some consideration for the mortgage sector such as how the market caters for people potentially working into their retirement age. This may allow opportunity for the lenders to develop new and innovative products to meet the needs to these potential customers.
Over the coming months and years, we will find out what type of impact this change has on the landlords that have set up limited companies for their buy-to-let (BTL) portfolios. Furthermore, there is a change in the tax-free dividend allowance which is being reduced from £2,000 to £1,000 (2023/2024) then to £500 (2024/2025). What is pleasing to see is that OBR’s latest forecast shows that inflation will more than half this year, the economy is on track to avoid recession in 2023, but the economy will shrink by 0.2%.
Ross Turrell, Commercial Director, CHL Mortgages
Day One Remortgage