On March 15 the Chancellor of the Exchequer Jeremy Hunt delivered his Spring Budget, accompanied by a full fiscal statement from the OBR.
The chancellor Jeremy Hunt began with the assertion the Office for Budget Responsibility (OBR) predicts the UK will avoid a technical recession.
The predictions are that the economy situation will get slightly better and despite the tax rate previously announced are confirmed the focus of this budget is on helping with cost of living and business investments.
Capital expenses will be fully deductible in the year of expenditure, the government is working on a better R&D system and creating new Free tax zones
UK Economy Rebounded Beating Expectations
The OBR forecast that UK will not enter a recession at all this year with a contraction of just 0.2%. And after this year the UK economy will grow in every single year of the forecast period: by 1.8% in 2024; 2.5% in 2025; 2.1% in 2026; and 1.9% in 2027.”
Despite forecasted improvement in UK GDP however, the UK’s growth is expected to lag behind other major economies.
Although the chancellor said the government desired a pro-business tax rate there will be no cut in the rates first announced by Rishi Sunak in his 2021 Spring Budget because of tight constraints on the public finances.
Corporation tax will increase from 19% to 25% from April for businesses generating more than £250,000 in profit. The rate for small businesses with profits up to £50,000 will remain at 19% and those with profits between £50,000 and £250,000 will be taxed at marginal rate.
The qualifying capital expenditure will be treated as tax deductible in the year it is incurred.
The Income Tax threshold for additional tax rate of 45% will be lowered from £150,000 to £125,140, the income level at which an individual will not have any Personal Allowance.
NICs rates had already been reduced with effect from 6 November 2022 (and will remain at those levels from 6 April 2023 – 12% or 2% above the upper earnings limit for employees and 13.8% for employers).
Again as already announced in 2022, for the tax year 2023 to 2024 the annual exempt amount (AEA) will be £6,000 for individuals and personal representatives, and £3,000 for most trustees.
For the tax year 2024 to 2025 and subsequent tax years the AEA will be permanently fixed at £3,000 for individuals and personal representatives, and £1,500 for most trustees.
R&D tax credits will be expanded. The Government announced cuts to R&D tax credits for UK’s SMEs and start-ups in the Autumn Statement. From April 2023, the R&D tax credit for SMEs will decrease from 130% to 86% from April 2023. However, the Chancellor has said he is open to reforming the system again in 2024/2025 and suggested that he makes 2023/2024 a transition year to maintain R&D tax relief rate at 130 per cent
To build a hub for AI in the UK the chancellor set out a £1m prize each year for ten years for innovation in the sector.
ISA limits will be kept the same. The current limit is £20,000 for an ISA has been in place since 2017/18.
Unemployment is also not expected to rise by more than 1%.
Older people will be enticed back into the work force with apprenticeships for over 50s, changes to pensions to keep doctors in the NHS, and reforms to childcare.
Pension tax free allowance increased from £40,000 to £60,000 and the lifetime allowance of £1m has been abolished.
The energy price cap of £2,500 for a typical household will be extended for the next three months until June.
Nuclear power will be classed as environmentally sustainable and will incentivise private investment in the sector. The chancellor announced the launch of Great British Nuclear to help bring down the price of electricity.
A new £600 incentive for childminders entering the profession, and £1,200 for those joining an agency.
In eligible households where all adults are working at least 16 hours, the government will introduce 30 hours of free childcare not just for three-and-four year-olds, but for every single child over the age of 9 months.
Working parents of two-year-olds will be able to access 15 hours of free care from April 2024, helping around half a million parents. From September 2024, that 15 hours will be extended to all children from 9 months up.
From September 2025 every single working parent of under 5 will have access to 30 hours free childcare per week.
This scheme shall bolster the employment market.
Twelve new investment zone have been announced which are supposed to follow in the foot steps of Canary Wharf.
Because inflation remains high, the decision was made not to uprate fuel duty with inflation or increase the duty.
Foreign worker rules
Hospitality businesses may be able to recruit foreign chefs as well as restaurant and hotel managers more easily under an update to the points-based post-Brexit immigration system. The Government has asked the Migration Advisory Committee (MAC) to review what it can do for sectors facing labour shortages, including construction, hospitality and retail, by way of tweaking the shortage occupation list.
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Improvements to Real Estate Investment Trusts (REITs)
The chancellor has confirmed that from April 2023, new rules will remove the requirement for a REIT to own at least three properties, provided it holds a single commercial property worth at least £20 million, and to amend the rule that applies to properties disposed of within three years of significant development activity.
Electricity Generators Levy
A temporary 45% levy on corporate electricity generators has been introduced from 1 January 2023 on “extraordinary profits”, defined as electricity sold at above £75MWh. The benchmark price of £75/MWh will continue to be in place until 31 March 2028.