Unlike his two predecessors, Jeremy Hunt has been in post long enough to deliver a Budget, and it followed in the footsteps of his Autumn Statement, with the emphasis on stability and driving down inflation, government borrowing and interest rates.
Whilst the UK is performing better than expected and may avoid a recession, higher taxes and fiscal drag may make economic growth elusive.
The Chancellor announced various measures to promote growth, encourage investment in business and make it easier and more attractive for the 7m adults not in work to consider a return to work.
Key points from the Chancellor’s statement are summarised below.
Spring Budget 2023 new key measures announced:
Taxes
- Pension annual contribution allowance to increase from £40,000 to £60,000
- Pension Lifetime allowance abolished (previously set at £1.07m)
- 130% Super Deduction is replaced by a new Full Capital Expensing for the next three years, so every £1 a company invests in IT equipment, plant or machinery can be deducted in full from taxable profits.
- Enhanced R&D tax credits for small or medium-sized businesses who will be able to claim a credit worth £27 for every £100 they spend, if they spend 40% or more of their total expenditure on R&D
- Enhanced tax credits for the creative sectors including film and TV
- From 1 August, there will be 11p reduction in duty on draught beers
- The 5p cut in fuel duty is retained for another year
- ISA savings limits are frozen for the next year
Spending
- Returnerships – new apprenticeship for returning workers aged 50+
- Childcare system reforms to help childcare providers and parents. Childcare costs can be paid upfront.
- Parents with children under three – there will be 30 hours of free childcare, to be introduced in stages as childcare provision capacity increases
- 12 new investment zones to be established including one in each of South and West Yorkshire
- New regeneration schemes across the UK, and new levelling up partnerships
- The Energy Price Guarantee (£2,500 a year cap) will be extended for a further three months to 30 June 2023
- 4m householders on pre-payment meters will have their energy charges made comparable to direct debit payers
- The Pensions Triple Lock and Pension Credit will be protected and rise in April 2023 by 10.1%.
- Increase in defence spending to 2.5% of GDP as circumstances allow
- An increase in nuclear capacity as an environmentally sustainable energy source
- More investment in growing the artificial intelligence sector and quantum computing
- An annual £1m prize for innovative work in AI
- £20bn for carbon capture projects
- Disability benefits reform to allow disabled people to seek work without losing benefits – Universal Support. Expected to help 50,000 people every year
- Increasing mental health provision for the UK workforce
- Doubling care relief threshold to reduce taxes for foster carers
- Workers on Universal Credit can work up to 18 hours a week without losing UC
- Enhance DWP’s midlife MOT service
Brief recap – key changes previously announced:
- Personal tax thresholds, CGT, IHT etc. – limits all frozen until 2028
- From April 2023, the rate at which people pay the additional rate of income tax, charged at 45%, will change from £150k to those earning over £125,140 (the figure at which personal allowances are fully abated)
- Corporation Tax to rise from 19% to 25% from 1 April 2023 for profits above £250,000
- The Annual Investment Allowance is set permanently at £1m
- National Insurance thresholds are frozen, and the Employment Allowance will be kept at £5,000
- Tax free allowance for capital gains will reduce in 2023/24 from £12,300 to 6,000 and again to 3,000 in 2024/25. The limit above which gains must be reported to HMRC, regardless of whether there is tax to pay, rises to £50,000 of proceeds from April 2023
- Stamp Duty Land Tax cuts announced in the Mini-Budget Growth Plan will now be time-limited, ending on 31 March 2025
- The tax-free dividend allowance will be reduced to £1,000 in 2023/24, and then to £500 in 2024/25
- Married Couple’s Allowance and Blind Person’s Allowance increased by 10.1% for 2023/24
- Business rates revaluation will happen in April, but there will be a new £13.6bn package of business rates support
- Business rates relief for retail, hospitality, and leisure businesses is being extended and increased from 50% to 75% up to £110,000 per business in 2023/24