The Spring Budget 2023 – back to work?
The new Chancellor’s first budget (he emphasised that the autumn statement was not a Budget, not a kamikaze one anyway!) didn’t present many surprises, maybe one surprise was the number of MPs in parliament given the number of strikes taking place today!
The Chancellor was buoyant announcing that the Office for Budget Responsibility predicts that we will avoid a recession in 2023, BUT the economy will shrink by 0.2%. Growth is predicted to be 1.8% next year, 2.5% in 2025 and 2.1% in 2026.
There was much in the way of good news delivered today! There were many incentives introduced for inducing people back into the workplace.
Experienced Workers’ and Pensions
Experienced Doctors put your golf clubs away! The chancellor will not penalise you anymore for working and increasing the value of your pension pot, the lifetime allowance (£1.073m) has been scrapped from 6 April 2023. The annual limit to the sums you pay into your pension scheme without being penalised from 6 April 2023 will rise from £40,000 to £60,000. If you are not a Doctor do not worry, while dealing with the early exodus of Doctors, other rich 50+’s like the Chancellor himself will also benefit from these changes.
The richest 1% can now avoid lifetime pension charges and also shelter more money into a pension scheme which benefits from Inheritance Tax exemption.
The Chancellor introduced a new initiative called a ‘Returnship’, basically an apprenticeship scheme for the over 50’s, this will boot up skills for over 50’s wanting to get back into the workplace.
Over 50’s on Universal Credit will also be given a mid-life MOT, this will look at a person’s finances, skills and health.
The Chancellor has extended the existing 30 hour free childcare scheme to cover children from the age of 9 months to 3 years. (The scheme already covers 3 and 4 year olds).
When do these changes begin?
- Working parents of two-year-olds will be able to access 15 hours of free care from April 2024.
- From September 2024, 15 hours will be extended to all children from 9 months upwards.
- And from September 2025 every single working parent of under-fives will have access to 30 hours free childcare per week.
This could be worth on average £6,500 every year for a family with a one year old using 35 hours of childcare each week.
The amount paid to nurseries for the 30 hour free childcare provision will increase by 30% and the minimum staff to child ratio will be aligned with Scotland to 1:5, freeing up more capacity in nurseries to provide the spaces enabling parents to get back into the work place.
All schools will receive additional funding to provide wrap around care from 8am to 6pm enabling more parents to be available for work during the traditional work day.
Changes to Universal Credit mean parents will now receive up to £951 for 1 child and £1,630 for 2 children and this will be paid up front.
Nothing major to report here!
The rate of corporation tax is still set to rise to 25% from 1 April 2023.
We are told that our business tax rates are lower than those in France, Germany and Japan, however our businesses are still investing less than those in these countries.
Business 101 taught business owners to plan and forecast, maybe the politicians should attend this course! How can any business plan capital expenditure without knowing the tax effects in the future?
The Super Deduction which allowed businesses to claim a 130% deduction for capital expenditure comes to an end on 31 March 2023. Two weeks before the end of this initiative, the Chancellor has now introduced a full expensing system for the next three years on expenditure on IT, plant and machinery, what happens next?
Research and Development initiatives have been tweaked again. Small or medium-sized loss making businesses will be able to claim a credit worth £27 for every £100 they spend on the basis that they spend 40% or more of their total expenditure on Research and Development.
There will be 12 new Investment Zones to add to those previously announced, with a hope of creating many successful areas like Canary Wharf.
A new voluntary employment scheme will be funded for 50,000 disabled people at up to £4,000 each.
A £600 incentive has been introduced for individuals becoming ‘childminders’, I expect when the detail is delivered that will mean people that take up the incentive will go on to be registered with the local authority.
Immigration rules to be relaxed for five roles in construction sector, to ease labour shortages.
Never has energy been such a topical subject!
Government subsidies limiting household bills will be extended to 30 June 2023. This limits the average household’s bills to £2,500 per year.
People that pay for their energy using pre-payment meters will pay similar rates for their energy as those paying by direct debit, where historically they have paid much higher rates.
Fuel duty has been frozen and the 5p cut in fuel duty has been extended by one year, saving the average household £100 per year.
There is a commitment to invest £20bn over the next 20 years on low-carbon energy projects that focus on carbon capture and storage.
£63m will be provided to help leisure centres with rising swimming pool heating costs, and to invest to become more energy efficient.
Alcohol duty will be frozen till 1 August 2023 and then increase in line with inflation. A Draught relief has been introduced today, this will mean draught products in pubs will be up to 11p cheaper than duty on alcohol sold in shops.
Commitment to raise defence spending by £11bn over the next five years.
Prison sentences for those convicted of marketing tax avoidance schemes.
An extra £10m over next two years for charities helping to prevent suicide.
Maximising on our post Brexit freedoms, there will be a streamlined approvals process promised for new medical products
£900m for new super computer facility, to help UK’s AI industry
What might he have done differently – our view?
How about more relief for businesses who have suffered crippling rising energy, material and labour costs, many received little support during COVID and many that did receive state backed loans to pay expenses during COVID when their businesses were negatively impacted are now in the process of repaying those loans while at the same time all other expenses have risen, but there is still pressure on keeping prices low.
Did we really need blanket approaches to childcare and pensions? While the country is suffering strikes in so many sectors, the government says that it does not have the money to give out pay rises to government funded employees, could a more targeted approach to childcare and pensions have left more in the pot to support the NHS, teachers, etc?
He must have been speaking to the Mayor of London who only last month announced that all London primary school children will receive free school meals for a year from September 2023. He is up for election in May 2024, no such thing as a free meal!
Overall pretty disappointing for the vast majority of businesses and working families. I’ll see you down the pub, at least a pint will be cheaper than drinking at home!
If you would like to discuss the changes and how they will affect you and your business, please contact us.