Service: Tax Sector: Insurance Publication: Broking Business
The Spring Budget of 15 March 2023 contained many measures trailed through the media in advance, some of these were of relevance to the Insurance Broking Community:
The confirmation that the main rate of Corporation Tax would increase to 25% as from 1 April 2023. For independent brokers with taxable profits below £250,000, their effective rate of tax will be lower than the headline rate (due to marginal relief) but no lower than the previous 19% rate.
Changes to Capital allowances will provide for full relief for much capital expenditure in the year that it is incurred, significantly accelerating tax relief for brokers with high capital spend.
Changes to the Research and Development Tax credits regime will likely give rise to both winners and losers in the sector for those incurring qualifying R&D work on innovative software projects. This is in advance of a likely wholesale redrawing of the rules from 2024.
The removal of the Pension Lifetime allowance rules will give additional opportunities for those (typically older) brokers who have been unable to make pension contributions in recent years due to the cap on the size of pension funds. However, as the income based tapering of Annual contribution allowance remains, very high earners may struggle to make meaningful additional contributions.
Finally, and again not a change from the announcements before Christmas, the starting point for the 45% band of Income Tax reduced to £125,000 from £150,000 from 6 April 2023, bringing many more people into the top rate of tax for the first time.
Transfer Pricing Director Farhan Azeem explains why UK-based MGAs and brokers operating in the EEA will need to (re)assess their business operating model from a transfer pricing perspective or risk facing tax adjustments and fines.