Finance Act 2023 was just 12 sections long and made provision for an increased tax
rate, reduced additional investment expenditure, extended effective period for the
energy profits levy, some changes to the taxation of cars, and increased relief for
expenditure on research and development. Most importantly, especially during a
sustained period of high inflation and falling real wages, FA 2023 froze the basic rate
limit and personal allowance for income tax and rate bands for inheritance tax until
the end of tax year 2027-28. The Institute for Fiscal Studies has predicted 1 in 5 UK
taxpayers will be in the higher rate bracket or above by 2027-28. The increased tax
revenues from ‘fiscal drag’ will be significant and noticeable. Judith Freedman has
also quite rightly pointed out that the tax system is not designed to handle the
administration involved with that large a number of higher rate taxpayers. Further
changes that will result in higher personal taxes noted below include reducing the
tax-free dividend allowance and the annual exempt amount for capital gains tax.
The headline domestic tax change in Finance (No 2) Act 2023 was to introduce
temporary full expensing for plant and machinery along with making the temporary
increase in Annual Investment Allowance permanent. Also notable was the abolition
of the lifetime allowance charge for pensions. In addition, the Act provides the
legislative framework for the UK to introduce a multinational top-up tax and domestic
top-up tax to implement the OECD’s Inclusive Framework Pillar 2 proposals in 2024.
For commentary on the changes introduced by the Finance Act 2023 and Finance (No
2) Act 2023, readers are directed to issue 4 of the 2023 British Tax Review, available
on Westlaw.
In his remarkable 23 September 2022 statement in the House of Commons, then
Chancellor Kwasi Kwarteng announced a series of unfunded tax cuts, which were
quickly reversed by the new Chancellor Jeremey Hunt after Rishi Sunak replaced Liz
Truss as Prime Minister. One of the few announcements that day that was not
reversed was the abolition of the Office of Tax Simplification. This author hopes that
a future government will rethink this decision as the OTS made substantial
contributions to the development, simplification, and understanding of UK tax law
and was extremely good value for money. OTS reports have been a fixture of this
author’s reading lists for many years and the lack of new ones represents a real loss to
the profession, academics and students. Readers are also directed to a current note by
Adrian Sawyer on the OTS’s abolition in issue 2 of the 2023 British Tax Review.
Finally, I’d like to extend my warmest congratulations to Dr Dominic de Cogan of the
Faculty of Law, University of Cambridge for winning second prize in the prestigious
Peter Birks Prizes for Outstanding Legal Scholarship for 2022. The prize was
awarded by the Society of Legal Scholars for his book Tax Law, State-Building and
the Constitution, published by Hart Publishing in August 2020.
