Spring Budget 2023

This week Chancellor Jeremy Hunt presented his Spring Budget Statement. In the lead up to the Budget, many experts were predicting what was supposed to be a relatively ‘dull’ Budget, with few surprises expected. And whilst it was a fairly basic Budget in terms of the number of announcements, the announcements were anything but dull.

What was also interesting about this Budget is that usually when it comes to Budget Statements, everything is maintained under strict lock and key, with anything in the press very much guesswork. This time however, it felt much more like some sort of hacking scandal with several of the announcements being leaked in advance by some sort of undercover insider.

Budget Statements are usually built around a theme. This year’s Budget was no different – how can the government encourage people to get back working, and working for longer. This has very much been a political issue recently, certainly with big and skilled earners looking to take early retirement. The question is, “will the incentives work?”

So what was announced?

Business Taxation

• From April 2023, the main rate of corporation tax, paid by businesses on taxable profits over £250,000 will increase from 19% to 25%.
• If your business makes profits of less than £50,000, you will continue to pay 19%.
• For companies with profits between £50,000 and £250,000, the tax rate will be between 19 and 25%.
• The government will allow businesses to subtract money they invest in things like IT equipment and machinery from the profits they pay corporation tax on, for the next three years.
• There are to be tax breaks and other benefits for 12 new investment zones across the UK, funded by £80m each over the next five years.

Personal Taxation

• The cap on the amount individuals can accumulate into pension savings over their lifetime before having to pay extra tax is to be abolished.
• The tax-free yearly allowance for pension contributions is to rise from £40,000 to £60,000.
• Fuel duty is to be frozen, including keeping the 5p cut for another 12 months.
• Alcohol taxes are to rise in line with inflation.
• The tax on tobacco is to increase by 2% above inflation, and 6% above inflation for hand-rolling tobacco.

Employment

• From April 2024, the 30 hours of free childcare for working parents in England is to be expanded to cover one and two-year olds.
• Families on childcare are to receive childcare support upfront rather than in arrears. The £646 a month per child cap is to be raised to £951.
• A new fitness-to-work testing regime will launch, for people looking to qualify for health-related benefits.
• £63m will be available for programmes to encourage retirees over 50 back to work.
• Immigration rules are to be relaxed for five roles within the construction sector, to help ease labour shortages.

In Summary

With the pension lifetime allowance abolished and the tax free amount that can be contributed to pensions increased, there is a clear strategy to incentivise people to work for longer and to save more for their retirement. Likewise by including one and two-year olds under the free childcare system, it enables parents to return to work quicker.

It should be pointed out that the pension changes don’t just benefit those planning to retire in the near future, they can also be great for business owners looking to reduce their tax liabilities.

If you’re looking to purchase equipment and machinery, the announcements will also be of interest to you.

If you’re unsure of how the announcements effect you, or what actions you should take as a result, please get in touch. We’d love to hear from you.