Spring Budget 2023 – Key Points

After the initial announcement last week when Chancellor Jeremy Hunt delivered his Spring Budget, more information has been made available. We have summarised the key points below:

Debt, inflation and economic growth

• The Office for Budget Responsibility has predicted that the UK will avoid recession in 2023, but the economy will shrink by 0.2%
• The predicted growth is; 1.8% for next year, 2.5% in 2025, 2.1% in 2026
• The inflation rate in the UK is predicted to fall to 2.9% by the end of 2023, down from 10.7% in the final 3 months of 2022
• The GDP underlying debt forecasted to be 92.4% in 2023, rising to 93.7% in 2024

Pensions

• The current £1.07m cap on the amount that individuals can accumulate in pensions savings over their lifetime before having to pay additional tax is to be abolished
• After being frozen for 9 years, the annual tax-free allowance for the pension pot will rise from £40,000 to £60,000

Corporation tax

• Corporation tax main rate, paid by businesses on taxable profits over £250,000, will increase from 19% to 25%
• Marginal relief will be given to companies with profits between £50,000 and £250,000

Tax breaks

• £80m will be spent over the next 5 years to fund tax breaks and other benefits for 12 new Investment Zones across the UK including East and West Midlands
• International traders will have reduced paperwork and will be given longer to submit custom forms

Capital Allowances

• Companies can lower their taxable profits deducting investment in new machinery and technology
• The super-deduction capital allowance regime will end on 31 March 2023 and from 1 April 2023 it will be replaced with ‘full expensing’ 100% capital allowances for qualifying plant and machinery. This is currently confirm to continue till 31 March 2026, however the Government indicate it is their ambition to make this permanent
• A 50% first year allowance will be introduced for ‘special rate’ plant and machinery, including long life assets. These rules apply only for corporation tax purposes and will not be available for businesses which are subject to income tax, unless they are below the Annual Investment Allowance threshold of £1m per annum

Research & Development (R&D)

• A higher rate of relief for loss-making R&D intensive SMEs will be introduced from 1 April 2023
• SME businesses will be able to obtain an effective credit of 27p for every £1 if their qualifying R&D expenditure constitutes at least 40% of their total expenditure
• The restriction on the inclusion of some overseas expenditure in R&D tax relief claims is deferred for a year until 1 April 2024
• Two new qualifying R&D expenditure categories will be created for data licenses and cloud computing services
• Regardless of the accounting period concerned, the new digital forms must be used for all R&D claims filed from 1 August 2023

Fuel

• Fuel duty has been frozen for another year, remaining as the 5p cut to fuel duty on petrol and diesel

Charity relief

• From 15 March 2023 EU and EEA charities and Community Amateur Sports Clubs will not qualify for charitable relief. There will be a transitional period until April 2024 for EU and EEA charities that HMRC has previously accepted as qualifying for relief

Energy

• £200m will be spent to bring energy charges for prepayments meters into line with prices for direct debit paying customers, affecting 4 million households
• £20bn will be invested over the next 20 years on low-carbon energy projects, focusing on carbon capture and storage
• More public funding promised for nuclear energy, to be classed as environmentally sustainable for investment purposes.
• £63m will be invested to help leisure centres with rising heating costs to become more energy efficient.

Childcare & Universal Credit

• Childcare revolution to expand 30 hours free childcare for children over the age of nine months
• Universal credit cap of £646 a month per child increased to £951, and childcare support to be received upfront instead of in arrears.
• ‘Incentive payments’ of £600 for those becoming childminders, and relaxed rules to encourage childminders to look after more children
• Child carers on universal credit will face tougher requirements to look for work
• A new fitness-to-work testing regime to qualify for health-related benefits to be introduced
• Universal Support to be introduced, a new voluntary employment scheme for disabled people in England and Wales
• £63m will be invested in programmes and skill development to encourage over 50 retirees to return to work
• To ease labour shortages, immigration rules will be relaxed for 5 roles in the constructions sector

Alcohol

• In line with inflation, alcohol taxes will rise in August, with new reliefs on beer, cider and wine sold in pubs to be introduced
• Tobacco tax to increase by 2% above inflation, and hand-rolling tobacco increase by 6%

Additional points

• £200m will be invested to help local councils repair potholes
• £900m will be invested into a new super computer facility to help the UK’s AI industry
• Charities helping to prevent suicide will receive an extra £10m over the next 2 years
• Streamlined approval process pledged for new medical products
• £11bn will be committed to raising the defence over the next 5 years
• The most egregious cases of tax fraud will face a 14 years maximum sentence, increasing by double from 7

Further information about the Spring Budget 2023 can be found here – https://www.gov.uk/government/publications/spring-budget-2023

If there is anything that was covered in the Spring Budget that you’d like to discuss in further detail, please call your usual contact at SFB or speak to an account manager on 03333 444 171.