With significant announcements usually reserved for the autumn budget, we are not expecting huge tax increases in the spring budget but nor are we expecting any tax cuts either. The Chancellor is due to speak about plans to stabilise the economy and boosting growth, and hopefully we will hear more about the newly created Department for Science, Innovation and Technology following the recent cabinet shake-up.
Corporation tax is already set to increase to 25% as of 1st April 2023 and we are not expecting any more U turns from the government. With the higher CT rates causing some businesses to consider setting up overseas or leaving the UK, now would not be the time to revisit capital gains tax (CGT) rates, which have also been rumoured to increase in line with income tax rates over recent years.
With the annual exempt amount for CGT already reducing to £6,000 for 2023/24 and halved again for 2024/25, it is our hope that the rates of CGT will not change and the current benefits of Business Asset Disposal Relief will remain in an attempt to incentivise tech SMEs to continue to set up and grow their businesses in the UK.
Research and Development tax relief
There was widespread frustration following the autumn 2022 announcements that R&D reliefs under the SME scheme were being cut in an attempt to reduce fraud. The government is currently consulting on a single R&D scheme that would see one R&D scheme based on the current RDEC scheme. Tax simplification is always welcomed, as long as it is not at the cost of smaller businesses investing in innovation in the UK.
The government closed the Help To Grow: Digital scheme in February 2023. In its place we would welcome alternative investments in businesses to support the adoption and integration of new technologies such as AI, which is featuring more heavily in the news, into the workplace.
A consultation paper was recently released committing to a new regulatory regime for cryptoassets. It may be too soon to expect any announcements on this in the forthcoming budget, but we expect crypto to become a growing presence in government announcements and new legislation over the coming months and years.
Investing in people
It’s rumoured that the Chancellor might increase the lifetime allowance for pensions in an attempt to bring early retirees back into the workforce. Separately, apprenticeships are being incorporated into the UCAS system to help young people more easily find apprenticeship schemes.
It would be a good time therefore to invest in upskilling the UK workforce in digital skills. TechUK has been calling on the government to introduce a Digital Skills Tax Credit for some time to help improve efficiency in the workplace in light of growing wage costs, and with agile working the new normal some incentive may need to be given to businesses to employ UK workers rather than look overseas.