Spring budget 2023 – what’s been announced?
Andrew Morgan is a partner and Head of Private Client at Stephen Rimmer Solicitors. You can contact Andrew by calling 01323434414 or emailing firstname.lastname@example.org
This year’s Spring statement saw Chancellor Jeremy Hunt in confident mood with jokes aplenty and a promise to fill the holes in the economy. Here we'll give a recap on what was announced and what these measures mean for you, your family and/or your business.
The Chancellor opened with news that the Office for Budget Responsibility (OBR) is confident that the UK would avoid a recession in 2023, reflecting lower expectations for wholesale energy prices and the Bank Rate, and would suffer a contraction of just 0.4% in the first quarter of 2023. This overturns predictions of last Autumn, and the OBR now expects inflation to fall to 2.9% in Q4 2023, with overall inflation for 2023 at 6.1%.
Against that backdrop, the Chancellor set out a series of measures which he said were intended to deliver growth through investment incentives and improved labour supply.
Andrew Morgan from Stephen Rimmer's private client department commented: “The promise of an extra £200m for local authorities to tackle potholes was a small ticket item offered up by Mr Hunt, but it neatly summed up the attitude of this Budget, which was about sprinkling a little something in the assorted holes in the economy at granular level.”
The bulk of his statement was focused on action to tackle business growth, but the Chancellor opened with a range of give-aways: cutting the cost of a pint in the pub; enabling swimmers to keep splashing; motorists paying less at the pumps and helping with consumer energy bills.
This will see the Energy Price Guarantee maintained at £2,500 for the next three months and an end to the premium paid by those on prepayment meter. Local authorities struggling to pay the energy bills to keep pools and other community facilities open will receive a boost with a £63m fund. Fuel duty will be frozen for the next 12 months and a reduction in alcohol duty on draught beer served in pubs will see a pint costing up to 11p less.
For those looking to raise a family, there was a promise of greater access to childcare in the years ahead, including wraparound provision in schools, to support more women returners to the workplace. This includes an extension of free childcare to include all children under five years, from the end of maternity leave. A phased introduction will see 30 hours of free childcare for all children aged over 9 months by September 2025, for eligible working parents. Eligibility will match the existing 30 hours offer in place for three to four year olds.
Alongside greater support for older workers to return to employment, with ‘Returnerships’ and more Mid-life MOT’s, those leaving employment because of pension contribution restrictions were offered an incentive to keep working. The Lifetime Allowance charge for pension contributions is set to be abolished altogether, and the annual allowance will be increased from £40,000 to £60,000.
Andrew Morgan commented further: “While the Chancellor radiated confidence in delivering his statement, positioning his plans as the route towards future success, it was against the backdrop of continuing economic hardship and challenge, with many struggling in the cost-of-living crisis. We saw a number of measures introduced to support the workforce and stimulate enterprise which may translate into opportunities ahead, such as around capital allowances and R&D, but for those companies interested in maximising these benefits, it’s worth drilling down on the detail with specialists first.”
Key takeaways for employers and business owners include:
• A ‘full expensing’ policy from 1 April 2023 providing 100% first-year capital allowance for qualifying plant and machinery assets, and a 50% first-year allowance for qualifying special rate assets. This replaces the so-called super-deduction on capital allowances which ends on 31 March 2023.
• Changes to R&D tax credits designed to support research and development (R&D) intensive businesses, where qualifying R&D expenditure is worth 40% or more of its total expenditure. Eligible loss-making companies will be able to claim £27 from HMRC for every £100 of R&D investment.
• £900 million of funding for an AI Research Resource and a world-leading exascale computer and a new Quantum Strategy with a commitment to £2.5 billion ten-year research and innovation programme.
Also contained in the small print was a concession for low income trusts and estates, with measures designed to reduce reporting and administration. For those eligible, these include not needing to pay tax on income up to £500 as it arises, a removal of default basic and dividend tax rates on the first £1,000 slice of discretionary trust income, and changes to make sure beneficiaries of UK estates do not pay tax on income distributed to them within the £500 limit for the personal representatives.
More detail from the Government about the statement is available here.
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