Chancellor Jeremy Hunt has unveiled his first Spring Budget in the House of Commons, placing a strong emphasis on enticing those who have left their jobs to return to the workforce and stimulating business investment. The 2023 Spring Budget comes at a crucial time as the UK faces economic challenges and a rapidly changing global landscape.
In this article, we will delve into the key points of the budget, examining each section in detail and providing a summary of the main announcements. Hunt’s four-pillar plan – Enterprise, education, employment, and everywhere, seeks to help keep us going in the right direction as a nation.
Keep reading to learn everything you need to know about the budget!
Taxation and Wages
Chancellor Hunt has introduced several significant changes to taxation and wages. Among these is the decision to abolish the cap on the amount workers can accumulate in pension savings over their lifetime before having to pay extra tax, which is currently set at £1.07 million.
Additionally, the tax-free yearly allowance for pension pots will rise from £40,000 to £60,000, having been frozen for nine years.
Fuel duty will remain frozen, with the 5p cut to fuel duty on petrol and diesel, initially due to end in April, now extended for another year. Alcohol taxes will rise in line with inflation from August, with new reliefs for beer, cider, and wine sold in pubs.
Finally, the tax on tobacco will increase by 2% above inflation, and 6% above inflation for hand-rolling tobacco.
- Abolished cap on pension savings before extra tax
- Tax-free yearly allowance for pension pots increased to £60,000
- Fuel duty frozen with 5p cut extended for another year
- Alcohol and tobacco taxes increased in line with inflation
To address the energy crisis, the government has extended subsidies that limit typical household energy bills to £2,500 a year for three months, until the end of June. A £200 million investment will bring energy charges for prepayment meters into line with prices for customers paying by direct debit, affecting 4 million households.
The government also committed to investing £20 billion over the next two decades on low-carbon energy projects, focusing on carbon capture and storage. Nuclear energy will be classified as environmentally sustainable for investment purposes, and more public funding is promised.
Furthermore, £63 million will be allocated to help leisure centres with rising swimming pool heating costs and invest in becoming more energy efficient.
- Extension of government subsidies on household energy bills
- £200 million investment to equalise energy charges for prepayment meters
- £20 billion commitment to low-carbon energy projects
- Support for nuclear energy and leisure centre energy efficiency
Jobs and Work
In an effort to support working parents, the government will expand the 30 hours of free childcare to cover one and two-year-olds in England. Families on universal credit will receive childcare support up front instead of in arrears, with the £646-a-month per child cap raised to £951.
Additionally, there will be £600 “incentive payments” for those becoming childminders, and relaxed rules in England to let childminders look after more children.
New fitness-to-work testing regimes will be introduced to qualify for health-related benefits. Funding will be provided for up to 50,000 places on the new voluntary employment scheme for disabled people, called Universal Support. There will be tougher requirements to look for work and increased job support for lead child carers on universal credit.
The government will also create more places on “skills boot camps” to encourage over-50s who have left their jobs to return to the workplace. Immigration rules will be relaxed for five roles in the construction sector to ease labour shortages.
- Expanded free childcare for one and two-year-olds
- Increased childcare support for families on universal credit
- New fitness-to-work testing and employment schemes for disabled people
- More skills boot camp places for over-50s
Economy and Public Finances
According to the Office for Budget Responsibility (OBR), the UK will dodge a recession in 2023, but the economy will face a minor contraction of 0.2%. The OBR projects that growth rates will rebound to 1.8% next year, followed by 2.5% in 2025 and 2.1% in 2026.
By the end of this year, inflation is set to drop significantly to 2.9%, down from 10.7% in the last three months of 2022. The OBR also predicts that the underlying debt will reach 92.4% of GDP this year and increase to 93.7% in 2024.
- UK economy to avoid recession in 2023, but shrink by 0.2%
- Growth rates of 1.8% in 2024, 2.5% in 2025, and 2.1% in 2026
- Inflation rate to fall to 2.9% by the end of 2023
- Underlying debt forecast at 92.4% of GDP in 2023, rising to 93.7% in 2024
Business and Trade
The 2023 Budget has introduced several measures that will impact businesses and trade in the UK. The main rate of corporation tax, applicable to businesses with taxable profits over £250,000, is set to increase from 19% to 25%. Companies with profits between £50,000 and £250,000 will pay a rate between 19% and 25%.
To incentivise investment, companies can now deduct investments in new machinery and technology from their taxable profits.
The government will also establish 12 new Investment Zones across the UK, offering tax breaks and other benefits. Each zone will receive £80 million in funding over the next five years.
International traders will benefit from reduced paperwork and streamlined rules, including extended deadlines for submitting customs forms.
- Corporation tax to increase to 25% for businesses with taxable profits over £250,000
- Investment deductions for new machinery and technology
- 12 new Investment Zones with tax breaks and benefits
- Streamlined rules and reduced paperwork for international traders
The 2023 Budget also includes several other measures addressing various aspects of the UK’s public and private sectors. The government has committed to raising defence spending by £11 billion over the next five years, strengthening national security.
In an effort to tackle tax avoidance, individuals convicted of marketing tax avoidance schemes will face prison sentences. The government will also provide an extra £10 million over the next two years for charities working to prevent suicide, addressing a pressing public health issue.
New medical products will benefit from a streamlined approvals process, expediting their entry into the market.
Additionally, the government will invest £900 million in a new supercomputer facility to support the UK’s AI industry and foster innovation.
- £11 billion increase in defence spending over the next five years
- Prison sentences for marketing tax avoidance schemes
- Additional £10 million for suicide prevention charities
- Streamlined approvals process for new medical products
- £900 million investment in a supercomputer facility for the AI industry
Spring Budget 2023: Empowering the UK with Jeremy Hunt’s Four Pillars
The 2023 Spring Budget champions economic growth, working families, and innovation, guided by Jeremy Hunt’s four pillars for growth: enterprise, education, employment, and everywhere.
By implementing initiatives that support businesses, improve skills, and extend benefits across the country, the budget creates a dynamic environment for businesses and individuals to thrive, paving the way for a prosperous future.
If you have any questions about the Spring Budget 2023 or would like to know more about how it might affect you, don’t hesitate to get in touch with Countplus Accounting. Our team of experts is here to help you navigate the changes and seize new opportunities.