What can we take away from this year’s Spring Budget statement?
This year's Spring statement saw Chancellor Jeremy Hunt in a confident mood, with jokes aplenty and a promise of bounty to fill the holes in the economy. He opened his hour-long delivery by announcing that the Office for Budget Responsibility (OBR) was confident that the UK would avoid a recession in 2023.
This reflected lower expectations for wholesale energy prices and the Bank Rate, with a predicted contraction of just 0.4% in the first quarter of 2023, overturning predictions made in the previous Autumn. The OBR now expects inflation to fall to 2.9% in Q4 2023, with overall inflation for 2023 at 6.1%.
Giveaways to Kick Off the Statement
Against this backdrop, the Chancellor set out a series of measures designed to deliver growth through investment incentives and improved labour supply. But he began with a range of giveaways.
These included cutting the cost of a pint in the pub, enabling swimmers to keep splashing, and helping motorists pay less at the pumps.
Local authorities struggling to pay the energy bills to keep pools and other community facilities open received a boost with a £63m fund, and fuel duty was frozen for the next 12 months.
A reduction in alcohol duty on draught beer served in pubs also saw a pint costing up to 11p less.
Promises for Families and Older Workers
For those looking to raise a family, the Chancellor promised greater access to childcare in the years ahead, including a wraparound provision in schools, to support more women returners to the workplace.
This includes an extension of free childcare to include all children under five years from the end of maternity leave. A phased introduction will see 30 hours of free childcare for all children aged over 9 months by September 2025, for eligible working parents. Eligibility will match the existing 30 hours offer in place for three to four-year-olds.
Alongside greater support for older workers to return to employment, with ‘Returnerships’ and more Mid-life MOTs, those leaving employment because of pension contribution restrictions were offered an incentive to keep working.
The Lifetime Allowance charge for pension contributions is set to be abolished altogether, and the annual allowance will be increased from £40,000 to £60,000.
According to a business expert, "The promise of an extra £200m for local authorities to tackle potholes was a small ticket item offered up by Mr. Hunt, but it neatly summed up the attitude of this Budget, which was about sprinkling a little something in the assorted holes in the economy at a granular level."
Concession for Low-Income Trusts and Estates
Contained in the small print was a concession for low-income trusts and estates aimed at reducing reporting and administration burdens.
This includes measures such as not needing to pay tax on income up to £500 as it arises, removing default basic and dividend tax rates on the first £1,000 slice of discretionary trust income, and changes to ensure that beneficiaries of UK estates do not pay tax on income distributed to them within the £500 limit for the personal representatives.
Key Takeaways for Employers and Business Owners
The Spring Statement of 2023 introduced several measures that employers and business owners should take note of. These include:
From 1 April 2023, qualifying plant and machinery assets will receive a 100% first-year capital allowance. For qualifying special rate assets, a 50% first-year allowance will apply. This replaces the super-deduction on capital allowances, which ends on 31 March 2023.
R&D Tax Credits
Changes have been made to R&D tax credits to support research and development-intensive businesses, where qualifying R&D expenditure is worth 40% or more of its total expenditure. Eligible loss-making companies can claim £27 from HMRC for every £100 of R&D investment.
The government has pledged £900 million of funding for an AI Research Resource, a world-leading exascale computer, and a new Quantum Strategy with a commitment to a £2.5 billion ten-year research and innovation programme.
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