The UK new business tax year comes in 1 April 2023, with a new regime to boost investment and spur UK growth. £27 billion cut to corporation tax, via Chancellor’s new full expensing policy, expected to boost investment by 3% in each of the next three years. Other tax changes coming into force include more business rates relief, extension to the fuel duty cut and a £450 income tax cut for carers.

The package, announced at Spring Budget, comprises 100% full expensing and a 50% first-year allowance. It will mean the UK has the most generous capital allowance regime in the OECD worth £27 billion over the next three years, amounting to an effective £9 billion a year tax cut for companies.

Full expensing lets companies 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 companies 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.

Further tax measures include:

l  The Annual Investment Allowance (AIA), an existing measure which also supports business investment, has been increased permanently to £1 million. This covers the investment needs of 99% of UK businesses.

l  Rebalancing the rates of Research and Development Expenditure Credit and the R&D SME scheme to ensure taxpayers’ money is spent as effectively as possible. As a result, the UK now offers the joint-highest uncapped headline rate of R&D tax relief support in the G7 for large companies.

l  The government also committed to considering the case for further support for R&D intensive SMEs, and at Spring Budget announced that there will be an increased permanent rate of relief for the most R&D intensive loss-making SMEs. To support modern methods of innovation, for accounting periods, businesses will also be able to claim for the costs of datasets and cloud computing under the R&D tax reliefs.

l  Expanding the Seed Enterprise Investment Scheme (SEIS) to help more UK start-ups raise higher levels of finance. This package will help over 2,000 start-up companies access finance.