Spring Budget: Our summary

4 minutes to read

As anticipated, Chancellor Jeremy Hunt’s first Budget was heavily focussed on a push for economic growth, by offering tax breaks to stimulate business investment, and address pressures on the UK’s workforce by providing incentives to remain in or return to employment.

Whilst few would have been expecting much in the way of tax giveaways, the Chancellor’s position was bolstered by the forecast from the Office of Budget Responsibility that the UK would avoid a technical recession over the coming year, although the economy is still expected to shrink in 2023 by 0.2%.

Despite pressure to reduce the tax burden on business, the Chancellor announced that the headline rate of corporation tax for businesses with annual profits over £250,000 will rise from 19% to 25% from 1 April 2023, as expected. However, Mr Hunt has been increasingly keen to emphasise the significance of the “effective rate” of tax paid by businesses, and the announcement of a 100% deduction for expenditure on plant and machinery for three years to 31 March 2026 will go some way to answering critics of the corporation tax rate rise.

Encouraging employment has been a key focus of the government, given the reduction in the workforce following the Covid-19 pandemic. Measures to encourage individuals, particularly women, to return to the workforce include increasing the amount of taxpayer-funded childcare to 30 hours for children aged between nine months and five years and altering the timing of Universal Credit payments. Those currently not working owing to disability or ill health will see the work capability assessment abolished, with the aim of encouraging those with health problems to look for work without benefits being affected.

Measures affecting individuals

  • The Annual Allowance for pension savings has been increased from £40,000 to £60,000 from 6 April 2023.
  • The lifetime pension savings allowance, which was set at £1,073,100 for the 2022/2023 tax year, has been completely abolished from 6 April 2023 going forward.

Measures affecting businesses

  • For companies only, the Chancellor has introduced a Full Expensing measure to allow 100% of the cost of qualifying plant and machinery to be deducted against profits before tax. Qualifying plant and machinery includes expenditure on main rate pool equipment such as tools, equipment, machines and some fixtures. This will be effective from 1 April 2023 to 31 March 2026. No cap was announced for this measure. Unincorporated businesses are not eligible for full expensing, but will be eligible to claim AIA on qualifying expenditure up to £1m per accounting period.
  • With the super deduction being stopped as at 31 March 2023, the Chancellor has announced that the 50% first year allowance for special rate assets acquired by companies, which was announced alongside the super-deduction, will be extended for three years to 31 March 2026.
  • From 1 April 2023 support will be provided to research and development (R&D) intensive small to medium sized enterprises (SMEs). This includes SMEs where 40% or more of their expenditure is on research and development. Loss making R&D-intensive SMEs will receive £27 for every £100 of R&D investment.
  • The AIA threshold, which was temporarily increased from £200,000 in 2019, will be permanently set at £1 million.
  • The process of granting EMI options will be simplified for companies granting options on or after 6 April 2023.

Indirect taxes

  • Plastic Packaging Tax rate to be increased in line with CPI.
  • Landfill Tax and Vehicle Excise Duty for cars, vans and motorcycles to be increased in line with RPI.
  • Fuel duty has been frozen again and the 5p cut in duty due to end in April to be kept for another year.
  • Freeze on Aggregates Levy, Air Passenger Duty and Vehicle Excise Duty for HGV’s extended for 2023/24.
  • Review of VAT treatment of Fund Management Services and the Financial Sector in general to continue with industry stakeholders with aim of reducing uncertainty and providing clarity in this area.
  • Government considering the extension of VAT relief on the installation of energy savings material to include new technologies and relevant charitable purpose buildings.
  • Government to legislate to simplify the Deposits Return Scheme. In future VAT will not be collected on deposits where the container is returned for recycling. VAT will be collectable by HMRC on unredeemed deposits.
  • Time limit for submitting claims under the Housebuilders DIY scheme being increased from 3 to 6 months and the claims process is to be digitalised.
  • The duty discount under the Draught Relief Scheme to be increased from 5% to 9.2%. This will mean draught products sold in pubs from August will be subject to up to 11 pence less duty than their counterparts sold in supermarkets.

Other

  • The Office for Budget Responsibility (OBR) forecast that UK inflation will fall from 10.7% in the last quarter of 2022 to 2.9% by the end of 2023, and that there will be no recession this year
  • 12 new investment zones are to be created including East Midlands
  • £8.8bn will be spent over the next 5 years for improvements in transport services
  • The Energy Price Guarantee is to remain in place for the next 3 months. It will stay capped at £2,500
  • Increased mid-life financial MOTs to help the over-50s stay in work longer
  • New apprenticeship for over-50s to extend working lives
  • There will be increased funding paid to nurseries for free childcare
  • 30 hours of free childcare for every child over 9 months for eligible households.
  • £100m will be allocated to support charities and community organisations, and £10m to voluntary sector for suicide prevention charities
  • Abolish work capability assessment for the disabled
  • Increased support for veterans
  • Sanctions will be applied to those who fail to meet work search requirements under Universal Credit.

Click here to see the measures announced in the Autumn Statement 2022 which will also be in place going forward.

Contact
If you would like to discuss these changes with one of our experts, please call either our Leicester office on 0116 254 9262, or our Loughborough office on 01509 263500. Alternatively, our contact form is here.