On 15 March 2023, Chancellor Jeremy Hunt delivered the Spring Budget, accompanied by a forecast from the Office for Budget Responsibility.
Spring Budget 2023 Report for Bookkeepers
The day after the Budget, ICB members will receive their own downloadable Budget Report for Bookkeepers by email. Make sure your membership is up to date to receive yours.
Spring Budget 2023 Highlights Webinar for Bookkeepers
On Tuesday 21 March, Rebecca Benneyworth FCA MBE will discuss the context and implications of the Budget in a webinar that is free to attend for students and members. Non-members can book to attend the webinar for just £39.
Recordings of the webinar will be emailed out to registered attendees after the event.
>> Book Budget Webinar
Spring Budget 2023 Overview and Key Facts
· Most tax rates and allowances were announced in advance at the Autumn Statement, so the Budget focused more on spending than on tax.
Chancellor of the Exchequer, Jeremy Hunt, said he is predicting the UK will avoid recession in 2023, with inflation set to fall from 10.7% in 2022 to 2.9% by the end of 2023.
In what was his first budget the chancellor unveiled a new ‘full expensing’ tax scheme, abolished the pensions lifetime allowance, and announced extra free childcare.
Hunt confirmed the rise in corporation tax from 19% to 25%. He confirmed just 10% of all companies will pay the full 25%, and only firms earning more than £250,000 will pay the full 5% tax on their profits from April. Hunt said that the 25% rate was still lower than France, Germany, Italy, and Japan.
There was, however, a surprise business tax announcement. For the next three years the government is introducing a ‘full expensing’ scheme. That means every £1 invested can immediately be deducted from taxable profits. Hunt explained: “Every single pound a company invests in IT equipment, plant or machinery can be deducted in full and immediately from taxable profits – a cut worth £9bn.” This replaces the “super deduction” previously in place.
Hunt also unveiled cuts for small and medium companies investing more than 40% of their total expenditure in research and development – that will be worth £27 for every £100 spent.
The annual investment allowance for smaller businesses has been increased to £1m. That will mean 99% of all businesses can deduct the full value of all their investment from that year’s taxable profits.
When it comes to pensions the chancellor increased the pensions annual tax-free allowance from £40,000 to £60,000. He also abolished totally the pensions lifetime allowance that was previously set at £1m (£1,073,000).
The government is planning to provide 30 hours of free weekly childcare for children below the age of three where both parents are working. The government will also pay childcare costs upfront for parents on Universal Credit who want to increase their work hours - the maximum they can claim is £951 for one child and £1,630 for two children per month.
The chancellor unveiled a series of measures to lure over-50s back into work too. A new apprenticeship scheme will target at this group, called “returnships”.
The government was elected on a levelling up agenda, and as part of this the Chancellor announced 12 new investment zones (IZs). That is 12 potential Canary Wharfs, said Hunt. These are West Midlands, Greater Manchester, the North-East, South Yorkshire, West Yorkshire, East Midlands, Teesside, and Liverpool. There will also be at least one in each of Scotland, Wales, and Northern Ireland. If chosen areas will have access to £80m of support.
Other measures included:
The Energy Price Guarantee will remain at £2,500 for next three months.
Duty on a pint has been ‘frozen’. From 1 August duty on draught products in pubs will be 11p lower than supermarkets. Hunt added: “British ale may be warm, but the duty on a pint is frozen.” It is all part of the new Brexit pubs guarantee.
Fuel duty will be frozen and the 5p cut maintained for another 12 months.
Creation of a £63m fund to keep public leisure centres and pools afloat.
Nuclear power to be classed as “environmentally sustainable” in green taxonomy.
The 45% and 50% tax reliefs have been extended for theatres, orchestras, and museums.
Personal tax
· The main personal tax-free allowance and the 40% tax rate threshold remain frozen at their 2022/23 levels until the end of 2027/28, representing a tax rise where income increases
· The 45% threshold is lowered from £150,000 to £125,140 for 2023/24
· Tax-free dividend allowance falls from £2,000 to £1,000, and CGT annual exempt amount falls from £12,300 to £6,000, for 2023/24
· Pension savings thresholds significantly increased: from 6 April 2023, Annual Allowance rises from £40,000 to £60,000 (with related changes to tapering and Lifetime Allowance Charge is abolished; maximum tax-free lump sum remains 25% of former Lifetime Allowance, i.e. £268,275
· ISA investment limit remains £20,000
· Increase in limit for shares that can be granted under Company Share Ownership Plans confirmed at £60,000
· Small Enterprise Investment Scheme limits increased from 6 April 2023 – maximum for investor is doubled to £200,000
· IHT thresholds and rates unchanged to the end of 2027/28
Business tax
· Confirmation of corporation tax rate increase from 19% to 25% from 1 April 2023 for profits over £250,000
· ‘Super-deduction’ for plant and machinery bought up to 31 March 2023 replaced by 100% first-year allowance for qualifying capital expenditure, without upper limit, for three years from 1 April 2023
· Improvements to Research & Development tax reliefs from 1 April 2023
· Reforms to audio-visual tax reliefs from 1 April 2024
· Announcement of 12 ‘Investment Zones’ to be established throughout UK with incentives for investment and employment
Other measures
· Energy Price Guarantee retained at £2,500 for average household for another 3 months to 1 July 2023
· Significant expansion of free childcare provision to be phased in from April 2024
· Fuel duty frozen, and temporary 5p reduction retained, for another year
· Introduction of ‘Returnerships’ – similar to apprenticeships – to encourage over-50s back into work
