Spring Budget 2023 Breakdown

The Chancellor recently unveiled his ‘back to work’ tax measures in the Spring Budget, focused on restoring market confidence, easing some of the strain on businesses and the public, growing the economy and rejecting the “narrative of decline”.

“In the autumn we took difficult decisions to deliver stability and sound money. Today, we deliver the next part of our plan: a Budget for growth. Not just growth from emerging out of a downturn. But long-term, sustainable, healthy growth,” said Hunt.

Changes included lifting the cap on tax-free pension contributions, the 100% ‘full expensing’ tax relief and freezing fuel duty, however the corporation tax hike was held firm.

So, what are the big changes you should know about from this budget?

Allowances for Pensions

One of the headline measures announced by Jeremy Hunt was increasing the annual allowance for pension contributions from £40,000 to £60,000.

He also abolished the pensions lifetime allowance (which is the limit on how much you can build up in pension benefits over your lifetime whilst still enjoying the full tax benefits) as an attempt to encourage older workers to stay within the workforce. The figure is currently £1,073,100, meaning you would be charged tax on any amount saved over that, but this will now be removed from April 2024.

Universal Credits for Childcare

Another headline measure that is being widely talked about is the changes to credit for childcare. Hunt increased the amount of credit parents are able to claim for childcare from £646 a month to a maximum of £951, as well as provided more free childcare hours for younger children to encourage parents to return to work.

Replacement of the Super-deduction Scheme

Between 1st April 2021 – 31st March 2023, companies that invested in qualifying new plant and machinery assets were able to claim a 130% super-deduction capital allowance on plant and machinery investments, as well as a 50% first-year allowance for special rate assets.

The scheme was created to encourage firms to invest in productivity-enhancing machinery and assets to help them grow, and allowed companies to cut their tax bill by up to 25p for every £1 they invest, making it one of the world’s most competitive capital allowances regimes.

Whilst calls were ignored to reverse the increase to corporation tax from 19% to 25% for businesses making more than 250,000, Hunt announced a replacement to the Super-deduction scheme.

This scheme is to be replaced by a 100% full expensing tax relief for the next three years on qualifying new main rate plant and machinery investments, from April 2023 to the end of March 2026, to continue encouraging firms to invest. Full expensing allows companies to write off the cost of investment in one go.

“If the super deduction was allowed to end without a replacement, we would have fallen down the international league tables on tax competitiveness and damaged growth. As a Conservative, I could not allow that to happen,” said Hunt.

You can read more about the scheme in detail here.

R&D Tax Credits

Hunt backtracked on the earlier decision from the Autumn Statement to cut R&D tax credits, instead restoring the relief with an “enhanced credit” which will be restricted to sectors like fintech and artificial intelligence.

Eligible small or medium-sized businesses will be able to claim £27 back from every £100 spent on R&D.

You can read more about the changes being made to R&D Tax Credits here.

Investment Zones

12 new Investment Zones were announced to drive business investment and level up the country. Each zone will have access to interventions worth £80 million over five years, including tax reliefs, grant funding and customs incentives.

The chosen zones will be clustered around research institutions such as universities: the West Midlands, Greater Manchester, the north-east, South Yorkshire, West Yorkshire, East Midlands, Teesside, and Liverpool, as well as at least one each in Scotland, Wales and Northern Ireland.

Road Fuel Duty

The road fuel duty has been frozen for an additional 12 months at the previous 5p-per-litre discount, which was originally announced on the 23rd March 2022.

Energy Price Guarantee

Hunt announced that the Energy Price Guarantee will be kept at £2,500 in Great Britain for an additional three months, until the end of June 2023.

New Apprenticeship for over 50s

Another measure to encourage workers over 50 back into work is a new ‘returnship’ apprenticeship, which aims to re-skill and up-skill workers, focusing on flexibility and previous experience.

The government has estimated 3.5 million people of pre-retirement age are economically inactive. Hunt claimed the apprenticeship could help get an extra one million people back into the UK’s workforce, which is currently experiencing a skills shortage.

The midlife MOT offer will also be expanded and improved, ensuring people get the best financial, health and career guidance ahead of retirement.

And finally… What’s going on with the economy?

According to the OBR, inflation will fall to 2.9% by the end of 2023 which is a welcome change from the 10.7% in the final quarter of 2022.

“I report today on a British economy that is proving the doubters wrong,” said Hunt. “We took difficult decisions to deliver stability and sound money. Since mid-October 10-year gilts have fallen, debt servicing costs are down, mortgage rates are lower and inflation has peaked… Today’s measures lead to a slightly lower overall tax burden for the rest of Parliament compared to the OBR forecasts”

Get More Business Blogs Like This

Like Us On Facebook | Follow Us On Twitter | Follow Us On LinkedIn