The Spring Budget saw the Chancellor outline his fiscal plans for the UK for the next twelve months based around four key priorities: Employment, Education, Enterprise and Everywhere. Although Mr Hunt’s speech lasted almost an hour, there yet again appears to be very little immediate changes that could impact on our clients. Nevertheless, we have provided comments below on those measures that may be of interest to our international clients.
The Lifetime Allowance has been abolished
In a surprising move, the Spring Budget announced that the Lifetime Allowance for an individual’s pension fund has been abolished! In other words, from 6 April 2023, there will no longer be a limit on the gross-value of a pension fund on retirement. This announcement, combined with the annual limit on pension contributions rising to £60,000 (tapering to £10,000 for high-earners, an increase from £4,000) could be helpful for those looking to add to their pensions and defer some taxes (or avoid incurring tax charges as the case may be) on their contributions. This should also have an impact of an individual’s ability to take 25% of the pension pot tax-free upon retirement, although the policy detail will need to be reviewed in respect of transitional measures and how this change will impact on previous allowances for individuals that accessed drawdowns under the previous rules.
Changes to Capital Gains Tax relief
Hidden behind the speech itself were, as usual, some more detailed measures that could have a greater impact. These included the Governments proposals to limit capital gains tax relief on share for share exchanges where UK company shares are exchanged for non-UK company shares, increasing the SEIS limit for individual investors from £100,000 to £200,000 and company limits from £150,000 to £250,00, and increasing the limit for a Company Share Option Plan from £30,000 to £60,000 per person. The Government continues to reform international tax for multinational corporate groups, including the introduction of a new “top-up tax” for UK parent companies with subsidiaries in low tax foreign jurisdictions, and some tweaks to the documentation requirements for Transfer Pricing policies.
Finally, it will be useful for some to note that divorcing couples will now have up to 3 years after ceasing to live together to make a “no gain no loss” asset transfer for Capital Gains Tax purposes. There will be no time-limit if the assets are transferred as part of formal divorce proceedings.
Whether this 4E’s Spring Budget is enough to shake away the legacy of last year’s mini-budget remains to be seen, but if you have any questions or concerns on the detail of the above then please do not hesitate to contact us.
Jon Elphick – Managing Tax Partner