top of page

2023 Spring Budget

On Wednesday 15 March, Jeremy Hunt announced his Spring Budget. One of the first things highlighted was inflation and the UK economy. Mr Hunt shared findings from the Office for Budget Responsibility, which predicts that by the end of 2023, inflation will drop down to 2.9%, at the end of 2022 the rate of inflation was 10.7%. The OBR has also predicted that the UK economy will shrink by 0.2% in 2023, but we will avoid a recession.

The main goal of this budget is to tackle the UK's productivity issues, which range from lower business investments and higher economic inactivity.

Energy prices

The Energy Price Guarantee for Households will continue for three more until June 2023, capping the average annual household energy cost at £2,500. While energy costs are predicted to start declining in July and not be as high as anticipated at the beginning of the year, the support has been maintained at the same level.

The Energy Bills Discount Program will take the role of the Energy Bills Relief Scheme until the end of March 2024, providing assistance to businesses and other non-domestic energy users.

Over-50s workers

In order to keep over-50s staying in work longer, the government is announcing incentives to keep them in work.

One of these incentives will allow people to build a larger tax-free pension, by increasing the annual tax-free limit from £40,000 to £60,000. This will hopefully persuade people to stay working so they can put more into their pensions and retire later.

In future budgets, the government will try to eliminate the lifetime allowance. The allowance currently stands at £1,073,100. The lifetime allowance is the tax-free limit a person can hold in their pensions.

The total amount that retirees who have already begun taking pension benefits can save tax-free under the Money Purchase Annual Allowance will rise from £4,000 to £10,000 as of April 2023.

Childcare costs

Mr Hunt has announced significant improvements to the childcare system in an effort to help more parents in returning to the workplace. All children between the ages of 3-5 are currently eligible for 15 hours of free childcare per week, or 30 hours if you or your partner are employed. The child is not eligible for free childcare if either partner makes more than £100,000 annually. However, the reforms mean eligible households – where both adults work at least 16 hours a week – will receive 30 hours of funded childcare from nine months old to four years old for 38 weeks a year.

  • The first change will be implemented in April 2024 and will provide working parents with children older than 2 with 15 hours of childcare per week.

  • The next adjustment will be in September 2024, for children over 9 months old will be eligible for the 15 hours of free childcare per week. This should coincide with the end of maternity leave.

  • Lastly, in September 2025, 30 hours of free childcare per week will be provided to all eligible households with children under the age of five.

Corporation tax

The anticipated rise of the main corporation tax rate will be going ahead. The tax rate will rise from 19% to 25% for businesses with profits of over £250,000 starting on April 1, 2023.

Capital Allowances

As of 1 April 2023, "full expensing" will replace the super-deduction system, which expires on March 31, 2023. It will let eligible machinery and plant to get 100% capital allowances. This will last three years, until March 31, 2026, though the government has stated that they hope to make it permanent.

Additionally, the government will implement 50% first-year allowances for "special rate" plant and machinery, including long-life assets. If a business is subject to income tax, these rules will not apply to it unless it falls below the Annual Investment Allowance threshold of £1 million per year, which they must do in order to qualify for the regulations that apply solely to corporation tax.

Fuel duty

The government made the predicted announcement that fuel duty will remain frozen and that the 5p reduction will last for another year. By doing this, a 12p per litre increase in fuel prices will be avoided.

Investment zones

In order to spur economic growth and "level up" the nation, the government has announced 12 investment zones around the UK. The West Midlands, Greater Manchester, the Northeast, South Yorkshire, West Yorkshire, the East Midlands, Teesside, and Liverpool are among the confirmed places.

Over a five-year period, £80 million will be available to each Investment Zone. Enhanced rates of capital allowance, the structures and buildings allowance, and relief from stamp duty land tax, business rates, and employer national insurance contributions are all included in a single five-year tax package. Moreover, the grant money will be made available to help solve regional productivity obstacles.

bottom of page