What you need to know about the 2023 Spring Budget
What you need to know about the 2023 Spring Budget
Jeremy Hunt presented his first Spring Budget on 15th March 2023. He was appointed as Chancellor on 14th October 2022, where he quickly reversed almost all of the former Chancellor, Kwasi Kwarteng’s, mini budget initiatives. During the Spring Budget, Hunt will outline his own plans for UK taxation and spending, although the government have already revealed several proposed changes around pensions, childcare and energy pre-payment meters prior to the announcement.
Download our free PDF for a summary of all the key changes
Jeremy Hunt confidently began his 2023 Spring Budget by announcing that the Office for Budget Responsibility has predicted that the UK will not enter a technical recession this year. A technical recession is defined as two consecutive quarters of negative GDP growth. Whilst this is certainly a strong positive note to start on, many are still cautiously concerned about the ongoing cost of living crisis which will mean that any growth is likely to be small and slow.
New tax and budget plans that affect day to day life:
1. The Cost of Energy
As expected, due to mounting pressure from various consumer groups and charities, Hunt has promised to extend the Energy Price Guarantee (EPG) currently set at £2,500 to until June. It was originally planned to rise to £3,000. However, the Energy Bill Support Scheme, which meant that most households have been receiving a £67 top up each month, is still confirmed to finish at the end of March. It means that a majority of households will see a slight increase in their monthly utility bill from April onwards.
The contentious issue of pre-payment meters that has been widely reported in the media has also been addressed by Hunt. He announced that those households on prepayment meters will have their charges brought in line with direct debit charges from 1 July onwards so that they will no longer be charged a premium.
Finally, on the subject of energy, the Chancellor announced that nuclear power will now be classed as “environmentally sustainable” as part of the government’s green economy strategy. He also plans to set up “Great British Nuclear” to bring down the costs of energy and encourage investment in the energy industry.
2. Fuel Duty
The cost (let alone the availability) of fuel has been a strong concern for most of 2022 but the Chancellor has announced that the 5p per litre cut on fuel will continue for at least another 12 months and fuel duty will be frozen. The Chancellor claims that this will save the average driver around £100 next year. With many of us still working from home, or working under a hybrid arrangement, it should hopefully lead to some significant savings.
3. The Brexit Pub Guarantee
The Chancellor received a couple of chuckles on his alcohol duty measure dubbed “The Brexit Pub Guarantee”. He vowed that beers sold at pubs will be 11p cheaper than when purchased in supermarkets. This was not possible when the UK was a part of the EU. In December, alcohol duty was already frozen until 1 August 2023, but it has now been confirmed that the duty freeze will continue past that date.
4. £200m extra in the pot for potholes
Motorists rejoice as Hunt promised an extra £200 million to tackle the tricky perpetual problem of potholes. Jeremy Hunt said: “The Spending Review allocated £500m every year to the Potholes Fund but today I have decided to increase that fund by a further £200m [for 2023/24]”.
However, the RAC have responded with “We need to significantly increase funding for local road maintenance and improvement so councils can resurface roads properly rather than patching them up and hoping for the best. Last year the Government spent £1.125bn on local roads in England which is in stark contrast to the £7bn that went into major roads from car tax, despite local roads covering so many more miles”.
New tax and budget plans specific to those in significant life stages:
1. Springing back to work
Although not one of his most popular initiatives, the Chancellor declared that “returnships” would allow an extra 1 million people over the age of 50 to return to the workplace offering valuable skills and experience to employers. The scheme aims to upskill over 50’s as well as improve flexibility of working arrangements to allow for them to return to work. Many over 50’s have responded that they have been working long enough and deserve their retirement.
2. Big pension changes
The cynics will argue that these big changes are the Chancellor’s best efforts to woo back the exodus of NHS doctors. Firstly, he has removed the pension lifetime allowance which is the maximum amount of money a person can save in a pension fund without being taxed. It was previously set at £1,073,100 which many thought was the reason why high earners (including NHS doctors) chose to retire early. Secondly, he has also increased the annual pension allowance from £40,000 to £60,000 to further entice workers of 50+ to continue working or to come out of retirement and return to the workforce. The government have confirmed in the 2022 Autumn Budget that the state pension would increase to 10.1% in line with inflation.
3. Reforms to free childcare
Many mothers were left disappointed by the Chancellor’s proposal of 30 hours free childcare for children aged 9 months and older. Currently, 30 hours free childcare is only offered to children aged three and four, so this new change will allow more parents to return to the workplace sooner. However, parents were questioning why this change would only apply from April 2024 and not sooner. Hunt has outlined that the roll out of this change would be introduced in stages and parents who work over 16 hours a week but earn under £100,000 a year would be eligible to claim. Not only that but he has promised that the childcare costs would be paid upfront instead of in arrears so that parents will no longer have to pay out themselves.
New tax and budget plans specific for businesses:
1. Introduction of Full Capital Expensing
The Super Deduction was due to come to an end by March 2023 so it’s no surprise that Hunt chose to launch a replacement scheme to encourage business investment. Rebranded as “Full Capital Expensing”, it will allow businesses to claim 100% tax relief on plant and machinery purchased from 1 April 2023 and will be available until March 2026. There will be no cap on the maximum you can claim on eligible capital expenditure.
2. Win or lose on R&D tax credits?
The Chancellor had already announced plans to make cuts to the R&D tax credit scheme in the Autumn Budget of 2022, so it comes as no surprise (but much opposition) that Hunt confirmed SME R&D tax credit will be slashed to 10% from 14.5% come 1 April 2023. Not only that but the enhancement allowance on expenditure which was previously 130% will now be cut down to only 86%. To compensate, Hunt has increased the RDEC rate for larger companies from 13% to 20%.
3. AI Sandbox
The Chancellor announced in his Spring Budget that he would launch the Manchester Prize of £1 million every year for the next ten years to those who compete in creating and developing AI technology. It demonstrates his ambitions for the UK to become the next science and technology superpower. Not only that but he has pledged a further £2.5 billion to be made available to companies that help achieve advancement in the area of quantum computing by 2033.
There have definitely been some big spending plans announced in the 2023 Spring Budget, but we mustn’t forget the tax cuts and freezes too. Notably, the personal allowance will still be frozen at £12,570 until 2028 and there is also no increase to the basic rate income tax band which stands at £50,270 until 2028 as well.
If you would like to discuss how the 2023 Spring Budget tax changes will affect you or your business, please use our contact form to get in touch.