Spring Budget News: 15/03/2023

In our blog last week we mentioned that the Chancellor was due to make a budget statement this week. As many expected, it is not full of new announcements and seems to present a position of maintaining the status quo. If I was being sceptical, I would suggest that he is holding some savings up his sleeve to give some pre-election tax cuts before the next general election, due 2024/25.

The headline announcements are:

• Pensions
  • The tax-free yearly allowance for pension contributions to rise from £40,000 to £60,00 from April of this year
  • The amount workers can accumulate in their pension over their lifetime, without paying extra tax, is currently limited to £1.07M. The Chancellor announced today that this limit will be abolished in a future finance bill i.e. there will be no limit
• Duties
  • Fuel duty has been frozen and 5p a litre reduction has been extended for another year
  • Alcohol duties will rise with inflation from August, but there will be new reliefs for beer, cider and wine sold in pubs
  • Tobacco taxes to rise by inflation plus 2-6%
• Energy
  • As expected, the Chancellor has extended the cap (on average bills) of £2,500 for a further 3 months
  • There was no announcements on extending business support, which comes to an end this month
• Child Care
  • The Chancellor has extended the free childcare offering for working parents in England to cover 1 and 2 year olds. This won’t come in until April 2024, with staggered starts for different ages, 15 hours free initially, rising to 30 free hours in 2025
• Corporation Tax
  • There were no announcements on changes to the increase in Corporation Tax rates coming in from April of this year. As a reminder the current rate is 19%, but the following rates apply from April:
    • Taxable profits of under £50,000 the rate stays at 19%
    • Taxable profits of over £250,000 then the rate increases to 25% on all profits
    • Taxable profits between £50,000 and £250,000 then the rate is pro-rated between 19 and 25% e.g. if your taxable profit was £150,000 then you would be half way and therefore rate of tax you would pay on the profits would be 22%
  • For the next 3 years the amount that companies can invest in plant and machinery and get 100% relief against profits is unlimited. Unfortunately, the rules on this are similar to the existing “super deduction” whereby it must be expenditure on brand new equipment. The Chancellor said that he wanted to make this permanent when possible. Thankfully the £1M Annual Investment Allowance remains though, which also covers second hand equipment purchases and is crucially also available to sole traders and partnerships.
• Economy and Public Finances
  • The forecasts presented are much improved and the economy is forecasted to shrink by only 0.2% in 2023. 2024 forecasted growth is 1.8% and in 2025 2.5%
  • Inflation is forecasted to fall to 2.9% by the end of the year

The national picture is one of an improving position, but not much in the budget today to provide short term relief to taxpayers.

Roll on the spring, summer, and better weather and hopefully we’ll start to feel the benefit of the improving position that Jeremy Hunt is looking at!

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