The Spring Budget 2023 was announced on 15th March 2023, delivering key changes to Pensions, Childcare, Holiday Tax, Pothole funds and much more.
Below we summarise the key points from the budget announcement and break it down into categories including:
The Chancellor Jeremy Hunt, opened the Spring Budget with a bold statement stating
‘The UK will not now enter a technical recession this year,’ he claims.
OBR Forecasts: Inflation to fall to 2.9% by year end
The Office for Budget Responsibility says UK CPI is to fall from its 2022 peak of 10.7 per cent to 2.9 per cent by the end of 2023.
OBR lifts growth expectations
Britain will see no recession in 2023, according to the OBR, with the economy contracting by 0.2 per cent.
The UK economy is now expected to grow by 1.8 per cent next year, before rising 2.5 per cent, 2.1 per cent and 1.9 per cent in the following three years, respectively.
The OBR also expects unemployment to rise by less than one percentage point to 4.1 per cent.
Britain is on track to meet the fiscal rules set by the government in November, according to OBR forecasts.
Under the rules, government debt must be falling as a percentage of economic output in five years’ time and the budget deficit must be below 3 per cent of gross domestic product within the same time-frame.
Energy Price Freeze
The Spring Budget 2023 confirmed Energy Price Guarantee will remain at £2,500 cap for the next three months – set to save average family a further £160.
The average household energy bill will stay at £2,500 until July, as the Government has stepped in to avoid April hikes to £3,000.
Energy regulator Ofgem has announced that its price cap will fall from £4,279 to £3,280 on April 1. That price cap effectively sets energy bills for more than 80 per cent of homes that are on variable-rate tariffs and pay by direct debit.
Those figures are based on a home using the average amount of energy, so those who use more will pay more.
But Government changes to its energy bill support programme mean that typical energy bills will stay at £2,500 until then July, then start to fall.
Lifetime Pensions scrapped
‘90% of the working age population will not reach anywhere near’ existing threshold
The Chancellor had been expected to lift the lifetime pension allowance – or how much you can save before being taxed – instead he has decided to scrap the cap entirely. It had been set at £1.07m.
The limit placed a cap on the amount people can have in their pension pot without facing tax penalties when they withdraw it.
It had been due to remain at £1.07million until 2026 – but now the limit has been abolished altogether.
The Government is trying to make it worthwhile for people to stay in work, especially high-earners such as doctors.
Annual Pension Increase
He also raised the annual allowance on contributions that can be made from £40,000 to £60,000 – a 50 per cent increase.
The annual allowance is the standard amount people can contribute to their pension every year and qualify for tax relief. It includes your contributions, your employer’s contributions and tax relief.
Over 50’s Returnship
To encourage over-50s back into the workplace, Hunt is proposing a new internship-style scheme which he dubbed ‘returnerships’.
He said this would train over-50s for new roles in sectors where there are shortages, such as technology.
The Government hopes this will tempt early retirees back to work to fill shortages it claims are holding back economic growth.
Childcare support plans were revealed during the Spring Budget 2023. A welcome announcement.
All parents working at least 16 hours a week will receive 30 hours a week free childcare for kids under 3 and over 9 months old. This will be in stages – all 2 year old’s from 2024 get 15 hours, all children over 9months from September that year, and then all children over 9 months from September 2025 get 30 hours.
To support this, there will be a 30 per cent hike in fees paid by the government to nurseries to £288million by next year.
The Chancellor ‘wants’ a further 1 million mothers to rejoin the workforce as a result of the scheme.
The Government has committed to paying for 30 hours of free childcare for children over nine months, in addition to the existing system for three-year-olds.
The announcement is expected to cost the Government around £4billion in additional funding.
In addition, Mr Hunt has increased the hourly rate paid to childcare providers by the Government and increased minimum child ratios from 1 to 4 to 1 to 5.
To encourage more people to join the childcare profession, new joiners will receive incentive payments of £600, rising to £1,200 for those joining through an agency.
The measures are being phased in to overwhelm providers with demand.
In addition, parents receiving universal credit can now receive £951 for one child, £1,630 for two – paid upfront.
Pot hole Fund
The Chancellor has announced an additional £200million fund to fix Britain’s craters. The pledge means around four million more holes will be filled.
The cash represents a boost of almost a fifth to annual funds for fixing crumbling rural and local routes, and will be released to councils in England in the coming weeks.
As the money is earmarked for town halls it means residential streets, country lanes and smaller B and C roads should benefit.
Britons flying abroad on family holidays this summer could see their trip hit by a rise of more than £50 thanks to taxes on fliers being upped in line with inflation.
Air Passenger Duty (APD) is now set to be raised by £11.47 per person – from £91 to £102.47 – on economy seats in long-haul flights to the likes of Thailand and Australia.
The tax will also be going up by £10.96 per person – from £87 to £97.96 – on economy class to medium-haul hotspots like Egypt, Cape Verde and the Caribbean.
Alcohol Duty Frozen
Following up with a continued booze duty freeze, Hunt says duty on draught products will now be 11p lower than in supermarkets under new plans, but wine drinkers will face 45p more a bottle.
The Chancellor handed a Brexit lifeline to UK pubs as he unveiled to keep tax on draught pints lower than that paid on supermarket cans and bottles.
The Chancellor unveiled a Brexit Pubs Guarantee that will keep the levy 11p lower amid changes to the way alcohol is taxed.
The Chancellor told MPs:
‘From August 1 the duty on draught products in pubs will be up to 11p lower than the duty in supermarkets, a differential we will maintain as part of a new Brexit pubs guarantee. British ale may be warm, but the duty on a pint is frozen.’
Fuel Duty Frozen
The Chancellor has maintained the 5p cut and freezes fuel duty for 12 months – he says it will save average driver £100 next year. This is the 13th consecutive year fuel duty will remain frozen.
It is estimated the freeze will save drivers around £6billion-a-year, with the RAC calculating that the 12-month extension to the 5p-a-litre fuel duty will save motorists around £3.30 each time they fill up.
The average cost of 20 cigarettes is set to soar past £13 as Jeremy Hunt confirmed tobacco tax will increase with the rate of inflation.
The move will hit the UK’s more than 6.6million remaining smokers in the pocket by a whopping £1.63.
According to the ONS the average price of a pack of 20 was £12.84, meaning that an increase at the 12.7 per cent RPI rate of inflation plus the additional 2 per cent added to pre-rolled cigarettes would take the price to £14.47.
‘Full expensing’ for small business investment
The Annual Investment Allowance will rise to £1million, Hunt says, meaning most firms can deduct the value of their investment from taxable profits.
Chancellor also confirms the introduction of ‘full expensing’, which allows all UK-based qualifying capital expenditure to be written off against taxable profits.
Treasury estimates put the cost of ‘full expensing’ would cost £11billion at peak, falling over time.
Back To Work
A white paper is being published on disability benefits, which will include plans to abolish capability assessments and to separate benefits from capacity to work. This, he says, will allow disabled people to look for work without fear of losing government support.
In addition, a greater threat of sanction will be imposed on those working 18 hours a week.
For the over-50s, 3.5m of which are not part of the labour force – 320,000 more than before the pandemic, the Chancellor offers three steps.
- Boost career guidance offering
- New apprenticeships for over50’s, including ‘returnerships’ working alongside existing schemes.
- Reform to ‘unpredictable pension tax charges’
Corporation tax increase and business tax breaks
In the Spring Budget 2023, it was announced Corporation tax on businesses will still rise to 25 per cent from 19 per cent from April, despite significant opposition from the Conservative backbenches.
But Mr Hunt says new business tax breaks will cushion the blow, largely in the form of full capital expensing.
Rishi Sunak’s ‘super-deduction’ scheme is coming to an end this month. The scheme allowed some firms to deduct up to 130 per cent of cost from profits before tax and a special 50 per cent rate first year allowance that lets you deduct 50 per cent of the cost from your profits before tax.
Now the Government has introduced full capital expensing for businesses for the next three years, with the intention to make it permanent as soon as it is ‘responsible to do so’.
It means all money a company invests in IT equipment, plant or machinery can be deducted ‘in full and immediately’ from taxable profit.
The Government says it is a saving of £9billion a year for businesses and is predicted to increase business investment by 3 per cent annually.
And in a boost for small and medium innovation businesses, they will be able to claim £27 worth of credit for every £100 they spend if they spend 40 per cent or more of their total expenditure on research and development.
Chancellor revealed 12 new investment zones.
The zones will cover the West Midlands, Greater Manchester, the North East, South Yorkshire, West Yorkshire, East Midlands, Teesside and Liverpool.
£80million will go to each zone over five years.
At least one will be in each of Wales, Scotland and Northern Ireland.
Each of the regions will also get extra local government funding, with £320million for the Scottish government, £180illion for the Welsh government and £130million for the Northern Ireland executive.
Environment & Climate Change
On the environmental front, Hunt has committed up to £20milion over 20 years to reduce the carbon emissions
This will also support up to 50,000 jobs, according to the Chancellor, while helping to attract private sector investment.
The Climate Change Agreement scheme has also been extended for two years, giving businesses £60million of tax relief on energy efficiency measures.
*Credits: gov.uk, dailymail.co.uk, rossmartin.co.uk