The Spring Budget of 15 March 2023 was Jeremy Hunt's first formal Budget as Chancellor. Coming five months after the Autumn Statement, it was deliberately quieter on personal taxation and focused instead on business investment, R&D, and labour market measures. For owner-managed businesses, the two changes that mattered most were the confirmation of the 25% corporation tax main rate from 1 April 2023 with marginal relief, and the introduction of full expensing for qualifying plant and machinery for a three-year window.
Full expensing — the headline business measure
The super-deduction, in force since April 2021, was due to expire on 31 March 2023. Full expensing was introduced as its replacement, available from 1 April 2023 to 31 March 2026. The relief allows companies to deduct 100% of qualifying new plant and machinery expenditure from taxable profits in the year of acquisition, with no upper limit. A 50% first-year allowance applies to special rate pool assets, with the remaining 50% entering the special rate pool at 6% writing down allowance.
For unincorporated businesses, the Annual Investment Allowance remained at £1 million per year — the cap that was made permanent in the Autumn Statement of 2022.
For SMEs investing in genuinely new plant — manufacturing equipment, IT infrastructure, commercial vehicles other than cars, plant for trade premises — full expensing delivers a clean 25% effective relief in the year of purchase, given that the company is on the new 25% rate. The interaction between full expensing and marginal relief required careful modelling for companies sitting in the £50,000 to £250,000 marginal band. Our corporate tax team built combined capital allowance and marginal relief models for every relevant client.
Corporation tax confirmed at 25%
Hunt used the Spring Budget to put the corporation tax debate to bed. The 25% main rate took effect from 1 April 2023, with the 19% small profits rate applying to companies with augmented profits up to £50,000 and marginal relief applying between £50,000 and £250,000. The effective rate in the marginal band is approximately 26.5% on each additional pound of profit. The associated companies rules apply to divide both the £50,000 and £250,000 thresholds.
For genuinely small companies with profits below £50,000, the 19% rate is unchanged from the previous regime. For companies with profits between £50,000 and £250,000, the effective rate is meaningfully higher. For companies above £250,000, the full 25% applies. The shape of the system represented a substantial return to the pre-2015 two-tier model.
R&D — relief for intensive SMEs
The Autumn Statement of November 2022 had announced a reduction in the SME additional deduction from 130% to 86% and a payable credit rate cut from 14.5% to 10% from April 2023. The Spring Budget added a partial reversal for R&D intensive loss-making SMEs — defined as companies where qualifying R&D expenditure represented at least 40% of total expenditure. For these companies, a higher payable credit rate of 14.5% was retained. The 40% intensity threshold was later reduced to 30% in the Autumn Statement of 2023.
The change required careful claim sequencing for clients with R&D claims straddling 1 April 2023. Periods needed to be apportioned, and the intensity test required documentation that most companies had not previously prepared. Our business advisory team built revised R&D claim methodologies into every engagement from late spring 2023 onward.
Pension and Lifetime Allowance changes
The most personally consequential measure for high-earning directors was the announcement that the Lifetime Allowance charge of 55% (or 25% plus income tax) would be removed from April 2023 with a view to full abolition. The annual allowance was simultaneously raised from £40,000 to £60,000, the money purchase annual allowance from £4,000 to £10,000, and the minimum tapered annual allowance from £4,000 to £10,000 with the threshold income raised to £260,000.
For owner-managed business directors with sizable pension pots near the £1.073 million Lifetime Allowance, the change reopened pension contribution as a corporation tax planning tool. We had a productive few months in spring 2023 advising clients on resuming employer pension contributions that had been paused for fear of the Lifetime Allowance charge.
Childcare expansion
The largest spending announcement was a multi-year expansion of free childcare for children aged nine months to two years for working parents in England, phased in from April 2024 to September 2025. For SME directors with young families, the change shifted the personal cash-flow calculation around drawing salary versus dividends, although the eligibility cap of £100,000 of adjusted net income per parent remained a sharp cliff edge.
What we did with this Budget
The Spring Budget of 2023 was the first since 2022 that contained genuinely usable structural measures rather than reversals. Full expensing, the higher pension annual allowance, and the Lifetime Allowance removal all opened legitimate planning routes that have been used continuously by our clients since. For owner-managed businesses with capital expenditure plans, the three-year full expensing window crystallised investment decisions that were later extended permanently in November 2023.
If you have capital expenditure ahead and want to confirm the optimal year and structure, book a corporate tax planning call with our team.