Budget
The Spring Budget has been announced by Jeremy Hunt, with a particular focus on growth and development and ‘back to work’ initiatives rather than tax changes. There were some surprises around pensions and welcome reforms around support for those with disabilities as well as childcare funding in an attempt to remove some of the existing roadblocks for some people of working age remaining in their jobs.
The OBR report today that inflation in the UK will fall from 10.7% to 2.9% by the end of 2023.
OBR forecasts that the UK is expected to avoid a technical recession in 2023 but with the economy still shrinking by 0.2%. However, the UK economy is forecast to grow by 1.8% in 2024; 2.5% in 2025; 2.1% in 2026; and 1.9% in 2027.
Debt will be 92.4% of GDP this year, rising to 93.7% in 2024-25; 94.6% in 2025-26, and 94.8% in 2026-27, before falling to 94.6% in 2027-28.
The UK economy is forecast to grow by 1.8% in 2024; 2.5% in 2025; 2.1% in 2026; and 1.9% in 2027.
The Chancellor continued with plans to increase Corporation Tax from 19% to 25% to come in from April 2023, with profits between £50-250k incurring a marginal rate. He supplemented the news with the introduction of ‘full expensing’ for the next three years from 1st April 2023. During this period, companies will be able to write off the full cost of qualifying plant and machinery investment in the year they invest. This will replace the Super Deduction scheme that is due to end this month.
A focus was placed on growth and support for the Technology, Creative, Science and AI sectors, with Research & Development (R&D) being placed at the heart of new initiatives. Small or medium-sized businesses that are loss-making will be able to claim credit worth £27 for every £100 they spend - if they spend 40% of their total expenditure on R&D. The video game sector will also see an expenditure credit of 34%.
12 new ‘Investment Zones’ were shortlisted; areas of significant economic development spread across the West Midlands, Greater Manchester, the North East, South Yorkshire, West Yorkshire, East Midlands, Teesside and Liverpool. There will also be one each in Scotland, Wales and Northern Ireland.
Hunt used this budget to make a commitment to the support of AI development and a new ‘quantum strategy’, with the launch of an AI sandbox alongside a £1m prize every year for the next 10 years for researchers that progress in critical areas of AI, named The Manchester Prize.
A consultation on the introduction of criminal charges for promoters of tax avoidance was also announced.
For working parents, 30 hours of funding has been extended to include babies and toddlers from 9 months to 2 years old starting from April 2024 and being fully implemented by September 2025. Staff-to-child ratios have been increased from 1:4 to 1:5.
A decrease in the number of childminders has sparked a new incentive of payment of between £600-£1200 to register. There was also a pledge to have all schools offering wraparound care from 8am - 6pm by September 2026.
For those who receive Universal Credit, the government will start paying childcare costs upfront rather than arrears, and the amount that can be claimed for childcare will increase to £951 for 1 child and £1630 for 2. This is a welcome step in the right direction for families and women in particular who are finding childcare costs and availability a block to remaining in the workforce.
Pensions were a key part of the budget, with the annual tax-free allowance to increase from £40,000 to £60,000 from 6th April 2023. The Lifetime Allowance charge will be removed from 6th April 2023 with the Lifetime Allowance being fully abolished in a future Finance Bill, something that the Chancellor hopes will encourage the over 50s, specifically doctors and consultants within the NHS to stay in work. No mention of IR35 here, though.
The tapered annual allowance for pensions will increase from £240,000 to £260,000 from April 2023, with the MPAA increasing from £4,000 to £10,000 per year.
For individuals, the reduction of tax-free dividend allowance from £2,000 down to £1,000 was confirmed, as well as the reduction of Capital Gains tax-free annual allowance from £12,300 to £6,000.
Crypto-transactions will be identified separately on the Self-Assessment tax return form from 2024-25 onwards.
The Chancellor has confirmed today that the Energy Price Guarantee will not go up in April as planned and will instead be extended at its current level of £2,500 until June when prices are expected to decrease. This isn’t a total cap on your bill, but it limits the unit price of energy. There was also a commitment to support vulnerable and lower-income households on prepayment meters who often end up paying more for their energy.
There was also a commitment to invest £20bn over the next couple of decades on low-carbon energy projects including ‘Great British Nuclear’, nuclear energy that will be classed as environmentally sustainable and comes with the promise of more public funding.
Fuel duty is to remain frozen for the next 12 months along with keeping the current 5p cut.
Duty on draught products in pubs will be up to 11p lower than the duty in supermarkets, something that the hospitality sector will welcome.
Income Tax
*Income Tax rates and thresholds are subject to parliamentary approval
Standard Personal Tax-Free Allowance (PTFA): £12,570
Basic tax rate - Rate of tax: 20% Total Earnings the rate applies to after PTFA: Up to £37700
Higher tax rate - Rate of tax: 40% Total Earnings the rate applies to after PTFA: From £37700 to £125140
Additional tax rate - Rate of tax: 45% Total Earnings the rate applies to after PTFA: Above £125140
Starter tax rate - Rate of tax: 19% Annual earnings the rate applies to after PTFA: Upto £2162
Basic tax rate - Rate of tax: 20% Annual earnings the rate applies to after PTFA: From £2162 to £13118
Intermediate tax rate - Rate of tax: 21% Annual earnings the rate applies to after PTFA: From £13118 to £31092
Higher tax rate - Rate of tax: 42% Annual earnings the rate applies to after PTFA: From £31093 to £125140
Top tax rate - Rate of tax: 47% Annual earnings the rate applies to after PTFA: Above £125140
Tax-free dividend allowance of £1,000.
Basic tax rate - Rate of tax: 8.75%
Higher tax rate - Rate of tax: 33.75%
Additional tax rate - Rate of tax: 39.35%
Lower earnings limit - Yearly: £6396
Primary threshold - Yeary: £12570
Secondary threshold - Yearly: £9100
Upper earnings limit - Yearly: £50270
Apprentice - Rate: £5.28
Under 18 - Rate: £5.28
18 to 20 - Rate: £7.49
21 to 22 - Rate: £10.18
23 and over - Rate: £10.42
If you’ve got any questions about how the Spring Budget will affect you, your business or your employees please feel free to give us a shout by booking a discovery call, and we’ll be happy to answer any questions.
