Chancellor Jeremy Hunt delivered his first Spring Budget today, referring to it as a ‘Budget for Growth.’
The first part of the speech as usual dealt with the economic background and forecasts on which the budget has been based. According to the Chancellor the most recent forecast is that although the economy will not grow this year, it is likely that a technical recession will be avoided. It is expected that the rate of inflation will fall to 2.9% by the end of the year, and the Bank of England will continue to focus their interest rate policy on targeting a long-time inflation rate of 2%.
Corporation Tax
The Chancellor confirmed that the main corporation tax rate will increase from 19% to 25% with effect from 1 April 2023.
Capital Allowances
To encourage further investment, it was announced that for three years all businesses will be able to claim full tax relief on all capital expenditure on qualifying assets, without limit. For those companies who will be paying tax at 25% this amounts to effectively retaining the same level of relief as is currently available under the super deduction relief that is to expire on 31 March 2023.
Research and Development
Changes have been announced to research and development tax reliefs for small companies, with those who are regarded as conducting intensive R&D being able to claim an enhanced relief. Legislation relating to this and also the changes announced last year is to be published shortly.
Business Tax
A consultation was announced regarding the simplification of the tax system for small business, including the extension of the cash accounting basis.
Personal Tax
As part of the plan to encourage highly paid NHS employees in particular to remain in work or return to work changes are to be made to the restrictions on pension funds. The limit on annual contributions is to increase from £40,000 to £60,000 and in a surprise move the lifetime limit on the tax-free value of a pension fund is removed completely. For those who have already started to draw on their pensions, the maximum limit on further pension contributions that can be made each year will increase from £4,000 to £10,000.
Other Measures
It was announced that free childcare for up to 30 hours per week will be extended to all children from 9 months of age to 2 years old, to match the free provision already available to all 3 and 4 year olds. There are conditions that will apply, and this is not available if either parent of the child has annual income of more than £100,000. Up to 15 hours per week of free care will be available from April 2024 and it is hope that by September 2025 all children under the age of 5 will have full access to 30 hours of free car.
Energy Price Support
The Energy Price Guarantee for households will continue at the current rate for three further months to June 2023, limiting the typical household energy bill to £2,500 per annum. The Energy Bills Relief Scheme, which supports businesses and other non-domestic energy users, is to be replaced by the Energy Bills Discount Scheme through to 31 March 2024.
‘The Returnership’
The government is concerned about the large numbers of the over 50’s who have permanently left the workforce in recent years, often driven by covid-related reasons. A number of measures are to be introduced to try to encourage these people to return to work. These include new apprenticeships for the over 50’s and the opportunity for them to have mid-life MOT’S to help assess their financial situation.
Fuel Duty
Fuel duty is to be frozen for the 13th consecutive year, including the retention of the temporary cut of 5% made last year.
Alcohol Duty
Alcohol duties will generally increase in line with inflation but the exact amount of the increases is yet to be confirmed. A reduction of up to 11p per pint will apply to all draught beers sold in pubs compared to the duty charged on the same drinks in shops and supermarkets.
For further advice on any of the points raised in this year's Spring Budget, please contact your
local Moore adviser.