Following the announcements made during the Spring Budget 2024, there are are number of changes which will have an affect on businesses for the new 2024/25 tax year.
Corporation Tax rates
The Government has confirmed that the rates of Corporation Tax will remain unchanged, which means that from April 2024, the rate will stay at 25% for companies with profits over £250,000. The 19% small profits rate will be payable by companies with profits of £50,000 or less. Companies with profits between £50,001 and £250,000 will pay tax at the main rate reduced by a marginal relief, providing a gradual increase in the effective Corporation Tax rate.
Capital allowances
The full expensing rules for companies allow a 100% write off on qualifying expenditure on most plant and machinery (excluding cars) as long as it is unused and not second hand. The rules were originally designed to be effective for expenditure incurred on or after 1 April 2023 but before 1 April 2026. Similar rules apply to integral features and long life assets at a rate of 50%. The Government announced in the Autumn Statement 2023 that both allowances will be made permanent. The Government is to publish draft legislation for consultation to help consider any potential extension to include plant and machinery for leasing. The Annual Investment Allowance (AIA) is available to both incorporated and unincorporated businesses. It gives a 100% write-off on certain types of plant and machinery up to certain financial limits per 12-month period. The limit remains at £1 million.
Research and Development (R&D) relief
As announced in the Autumn Statement 2023, the existing Research and Development Expenditure Credit (RDEC) and SME schemes will be merged, with expenditure incurred in accounting periods beginning on or after 1 April 2024 being claimed in the merged scheme. The rate under the merged scheme will be set at the current RDEC rate of 20%.
The changes also provide additional relief for loss-making R&D intensive SMEs through a higher rate of payable tax credit from April 2023, as a feature of the existing SME scheme. Those entitled to this higher rate would, from April 2024, continue to claim under rules similar to the current SME scheme rather than under the new RDEC scheme.
A number of other changes will apply to the new regime from April 2024, including that R&D claimants will no longer be able to nominate a third-party payee for R&D tax credit payments, subject to limited exceptions. Further action may be needed to reduce the unacceptably high levels of non-compliance with the R&D rules and HMRC will be publishing a compliance action plan.
For more on how the Spring Budget announcements could affect your business, get in touch with Mark Baycroft, Partner, or a member of the Business Tax team.
