Overview

This Finance Bill proposes changes to various taxes in the UK, including adjustments to energy profits levy, corporation tax, income tax, capital gains tax, inheritance tax, and vehicle excise duty (VED). The main aims are to increase government revenue and potentially stimulate investment in certain sectors while altering tax thresholds and allowances.

Description

Energy (Oil and Gas) Profits Levy:

Increases the tax rate from 25% to 35% for accounting periods starting on or after January 1, 2023. Reduces the amount of additional investment expenditure that can be offset against the levy from 80% to 29% for expenditure incurred on or after January 1, 2023. Extends the levy's duration to March 31, 2028.

Corporation Tax:

Increases the amount of relief for research and development (R&D) expenditure. Specific changes to the rates are included for various aspects of R&D tax credits for small and medium-sized enterprises (SMEs).

Income Tax:

Freezes the basic rate limit and personal allowance at current levels for tax years 2026-27 and 2027-28. Changes the threshold for the additional rate of income tax, setting it at £125,140 for tax years 2023-24 to 2027-28. Reduces the dividend nil rate, the amount of dividend income that is tax-free. This is reduced to £1000 for 2023-24, and to £500 for 2024-25 and subsequent years.

Capital Gains Tax:

Reduces the annual exempt amount from £12,300 to £6,000 for 2023-24, and further to £3,000 for 2024-25 and subsequent tax years. Removes indexation of this amount to inflation. Adjusts reporting thresholds for capital gains.

Inheritance Tax:

Freezes inheritance tax thresholds at current levels until 2027-28.

Vehicle Excise Duty (VED):

Removes the VED exemption for many electrically propelled vehicles from April 1, 2025, introducing new rates of duty for these vehicles. Also makes changes to other aspects of vehicle excise duty and removes some existing exemptions.

Government Spending

The bill is expected to increase government revenue. Exact figures are not explicitly provided in the document but the changes to tax rates and allowances will significantly impact government income.

Groups Affected

Oil and gas companies: Affected by increased levy rates and reduced investment allowances.
Businesses conducting R&D: Benefit from increased corporation tax relief (although some SME reliefs are decreased).
Higher-income earners: Potentially affected by changes to income tax thresholds, dividend tax, and capital gains tax.
Individuals inheriting significant assets: Potentially impacted by the freezing of inheritance tax thresholds.
Owners of electric vehicles: Affected by removal of VED exemptions and the introduction of new VED rates from April 2025.

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