Chancellor Jeremy Hunt has today delivered his spring budget. His relatively uneventful announcement aims to trim inflation whilst boosting productivity and growth. Here are our highlights.
Inflation
The OBR (Office for Budget Responsibility) expects inflation, currently at 10.7%, to fall to 2.9% by the end of 2023 – exceeding the Prime Minister’s target of halving it.
Pensions
The £1million lifetime allowance on tax-free pension savings has been abolished. Previously, any pensions over £1m would have been subject to additional taxation.
The pensions annual tax-free allowance will rise by 50% from £40,000 to £60,000, good news for both individuals and may benefit businesses with reduced corporation tax.
These changes and training programmes for over-50s are an attempt to get early retirees back to work.
Corporation tax
Corporation tax is set to rise from 19% to 25%
The 25% tax will hit businesses whose profits exceed £250,000. Those with profits between £50,000 and £250,000 will get marginal relief. For those with profits below £50,000, there will be no change.
Full Capital Allowance Expensing
The cost of investments in IT equipment, plant or machinery capital expenditure can be deducted from taxable profits in that financial year. This will lower firms’ taxable profits, making the UK more competitive and the OBR suggest this will increase business investment by 3% a year.
Research & Development
An “enhanced credit” has been introduced for small and medium-sized businesses if they spend 40% or more of their total expenditure on research and development.
Business Growth
12 investment zones likened to Canary Wharf (8 in England, 4 in Scotland, Wales & NI) will each receive £80m, of funding over 5 years.
Childcare
Parents working 16 hours a week of children aged nine months to five years will get 15 hours free childcare.
This will be staggered from April 2024 to ensure enough places. Children up to two years old will get 15 hours free from April 2024, children from nine months up will benefit from September 2024, and from September 2025 every single working parent of a child under five will have access to 30 hours free childcare per week.
The government hopes that this will get more people back to work and boost economic growth. At present, childcare costs in the UK are the highest in the world.
Other Measures
Energy Bills
Energy bills were due to rise from £2,500 to £3,000 from April. But higher tax revenues and lower energy prices mean that that the Energy Price Guarantee (EPG) of £2,500 will now be extended until July. When the EPG ends, it’s expected bills will fall to £2,000.
Duty
An extension of the 5p cut in fuel duty, at a cost of £6bn, has been announced for a year. Fuel duty will also be frozen for the next twelve months.
Tax relief of 11p has been announced on draught drinks served in pubs from 1 August – so a pint will be cheaper than in supermarkets.
Potholes
£200million funding boost to fund ‘curse of potholes’
Focal Business Group
Growing businesses need more from their accountant; as business accountants, analysts and advisors, we help you understand and manage your numbers to drive plans and decision making.
If you have any questions about how the Spring Budget will affect you and your business, please get in touch. Email [email protected] or call 0800 112 0880.