For a speech that lasted 60 minutes, many would expect there to be a large number of announcements and tax changes, but even when digging into the detail, the Spring Budget 2023 can be considered one of the lightest tax policy budgets in living memory.
Following the announcement, SoGlos speaks to Nick Haines, a partner at accountants and business advisers, Hazlewoods, to discover his seven key takeaways from Chancellor Jeremy Hunt's speech - and what they mean for individuals and businesses in Gloucestershire.
We're not headed for a recession
From a general economic perspective, there was some positive news that the Office for Budget Responsibility (OBR) now believes we will not enter a technical recession in 2023, but will see growth of between 1.8 per cent and 2.5 per cent over the next four years.
Further positive news was that inflation is believed to have peaked and is anticipated to fall from 10.7 per cent at the end of 2022 to 2.9 per cent by the end of 2023.
Super deduction is being replaced with ‘full expensing’
While the Chancellor is proceeding with the increase in corporation tax to 25 per cent from Saturday 1 April 2023, he did announce some measures to encourage investment. One of those was the introduction of ‘full expensing’ of qualifying plant and machinery expenditure from Saturday 1 April 2023 for three years - following the end of the 130 per cent super deduction - with the intention of making it permanent thereafter.
Full expensing is only available for companies spending on new and unused plant and machinery, but for most this effectively scraps the £1 million limit for annual investment allowance. However, given that 99 per cent of businesses fall within this limit already, some may find it odd that Hunt believes this policy is going to cost £9 billion per year, on average.
Introduction of a new R&D intensive payable credit
A new payable credit for ‘R&D intensive’ loss-making SME companies was announced, allowing the surrender of losses for tax credits at a rate of 14.5 per cent. This will mean that eligible companies will continue to receive £27 from HMRC for every £100 of qualifying investment.
To qualify as ‘R&D intensive’ the company’s R&D expenditure must equate to at least 40 per cent of total expenditure. Other loss-making SME’s will be entitled to a 10 per cent credit, as announced in the Autumn Statement.
Reforms to the childcare system
The Chancellor also highlighted his plans for a reform of the childcare system, with the intention of, ultimately, allowing all parents with children over nine months to have access to 30 hours of free childcare each week.
This will be phased in with two-year-olds having access to 15 hours initially from April 2024; children aged nine months and older having access to 15 hours from September 2024; then the full 30 hours being available from September 2025. The free childcare does not apply for those with adjusted net income over £100,000 and parents must be working a minimum of 16 hours per week.
Pensions changes
An announcement to increase the lifetime pensions allowance of £1.073 million was widely expected, however, the Chancellor went one step further and announced it would be removed altogether. He also announced an increase in the annual allowance from £40,000 to £60,000, but this will be tapered once ‘adjusted income’ reaches over £260,000, down to a new minimum figure of £10,000 (previously £4,000).
Given the limits in pension contributions and the taper effect, the removal of the pensions lifetime allowance would appear to be of little impact to people, as they would have been unlikely to breach it anyway. However, limiting the ability to contribute continues to puzzle some experts, when the drive is to get people saving for their own retirement.
More tax freezes
Fuel duty is being frozen for another year and it was announced that there will be a draught duty reduction to 11p less than supermarkets, to help pubs.
The Chancellor also announced that ISA allowances will be frozen once again.
New investment zones
The Chancellor highlighted that 70 per cent of growth is attributable to areas outside of London - and he intends to continue that trend with the announcement of 12 investment zones, including one in the West Midlands, that will enjoy tax benefits and access to £80 million of funding over five years.
Whilst nobody was expecting a bumper giveaway, many were expecting more than what was actually announced. Given the economy is still in a relatively precarious position, it may well be that the government's view was that it was too risky to make any significant changes at the moment.
