The Chancellor framed this budget as one for growth and prosperity with purpose, aimed at removing obstacles that stop businesses from investing. For us here in Northern Ireland, we heard that there would be £130 million provided to Stormont as part of the Barnett consequential, with an additional £3 million being made available to combat paramilitary activities and £40 million to provide additional further and higher education opportunities. We will also be able to have one of the new investment zones located here, providing additional funding and tax reliefs for the area selected.
Our tax team have been looking at the detail and have outlined below the main impacts on individuals and businesses here in Northern Ireland:
Individuals
As expected there were no changes to any of the previously announced personal allowances, earning limits and tax rates. The savings allowance of £5,000 per year was frozen, alongside ISA annual limits of £20k for adults and £9k for children.
For us, the gasps in the room occurred when the Chancellor announced major changes to pension tax relief. Individuals will now be able to put an extra £20k per year into their pension pot, without incurring a pension charge, up from £40k. The lifetime allowance, previously £1.07million, has now been completely abolished. The government is hoping that this will refrain experienced healthcare workers from retiring due to the taxation burden and assist the healthcare system.
Businesses
The Chancellor outlined a very long winded explanation as to how the UK’s increase of the main corporation tax rate to 25% from April 2023 was globally competitive and was silent on any future reduction. For companies here in Northern Ireland, profits arising from 1 April 2023 will be subject to a main rate that is double that of competitors in the Republic of Ireland.
Some good news for companies was provided in the new Full Expensing regime, that will effectively replace and continue the Super-Deduction scheme, which was in place for capital expenditure acquired between April 2021 and March 2023. The new regime will provide 100% tax relief on qualifying equipment acquired until 31 March 2026, with a view to introducing this regime permanently. There will also be a three year extension provided for First Year Allowances, which provide 50% tax relief on qualifying special rate assets, such as integral features or solar panels.
The booming film industry here will be able to avail of the new Audio-Visual Expenditure Credit, which will operate similar to the large companies R&D regime, and will provide film/high-end TV and animation/children’s TV with a headline credit rates of 34% and 39%, respectively.
Last time, back in November 2022, the Chancellor curtailed the R&D tax credit relief available to Small and Medium Enterprises (‘SME’) to £18.60 per £100 R&D spend. A new enhanced regime will increase the relief to £27 per £100 R&D spend, however the SME company will need to have at least 40% of their total expenditure qualifying for R&D. There is also additional time for companies to include overseas R&D within their claim until 31 April 2024.
The governments previous plans of merging the large company and SME regime is still an option, with implementation from April 2024.
Whilst the range of initiatives announced will no doubt provide some comfort for the local business community here, most business leaders are still awaiting clarity on the Windsor Framework and restoration of an Executive.
Get in contact with our Tax Team to learn more about how BDO can help you and your business in light of these recent announcements: Lorraine Nelson, Maybeth Shaw, Fiona Hall, Geraldine Browne, Claire McGuigan, Karen Doherty.
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