Spring Budget 2023

March 15, 2023

Big Ben, London during day

Spring Budget 2023

Enterprise, Education, Employment, Everywhere… All at once!

Introduction

The Chancellor of the Exchequer, Jeremy Hunt, presented the Spring Budget to Parliament earlier today. This Spring Budget is the first full Budget since October 2021. Since then, the UK has had three Prime Ministers and four Chancellors without a General Election or change in the party of government.

The Chancellor says this is a ‘Budget for growth’ based on the pillars of ‘enterprise, education, employment and everywhere’.

This snapshot is intended to give you high level bullet points of the key points announced by the Chancellor from the dispatch box.

More details are available from GOV.UK.

OBR economic forecasts

The OBR now expects that the UK economy will not fall into a ‘technical recession’ during 2023. Forecast are as follows:

Growth

2022: 4.0%
2023: -0.2%
2024: 1.8%
2025: 2.5%
2026: 2.1%
2027: 1.9%

A ‘technical recession’ occurs if the economy shrinks for two quarters in a row.

CPI Inflation

2022: 9.1%
2023: 6.1%
2024: 0.9%
2025: 0.1%
2026: 0.5%
2027: 1.6%

Public sector net borrowing

2022/2023: 6.1%
2023/2024: 5.1%
2024/2025: 3.2%
2025/2026: 2.8%
2026/2027: 2.2%
2027/2028: 1.7%

Unemployment

2022: 3.7%
2024: 4.4%
2025: 4.3%
2026: 4.2%
2027: 4.1%

Tax

  • Income tax and National Insurance rates and thresholds remain unchanged.
  • ISA subscription limits remain unchanged at £20,000.
  • Corporation tax increase from 19% to 25% will go ahead from April 2023 for firms which make a profit of more than £250,000.
  • From 1 April 2023 until 31 March 2026 investments made by companies in qualifying plant and machinery will qualify for a 100% first-year allowance against corporation tax. The intention is to make this permanent.

Pensions

  • Investment Zones will be introduced across the UK following discussions with mayoral and local authorities in England and the devolved administrations in Scotland, Wales and Northern Ireland. Investment Zones will benefit from tax incentives, planning liberalisation and wider support for the local economy.

Budget

  • The lifetime allowance charge will be abolished from 6 April 2023 with the lifetime allowance to be abolished in full in a future Finance Bill.
  • The maximum tax free cash payable for individuals without protection will remain £268,275 and not increase in future.
  • The pensions annual allowance will increase from £40,000 to £60,000 from 6 April 2023. Carry forward of unused annual allowances from the 3 previous tax years will remain available.
  • The money purchase annual allowance will increase from £4000 to £10,000 and the minimum tapered annual allowance from £4000 to £10,000 from 6 April 2023.
  • The adjusted income threshold for the tapered annual allowance will increase from £240,000 to £260,000 from 6 April 2023.

Potential complications

  • The scrapping of the LTA has come as something of a surprise, and has introduced some potential snags that could make the benefits of these higher allowances “ambiguous” for some savers.
  • One is that a sudden scrapping of the LTA will produce a range of outcomes affecting savers who are in slightly different positions pre- and post-retirement.
  • The second is that the complex tapered allowance remains in place, even with a slightly higher threshold – increasing from £240,000 to £260,000 from 6 April 2023.
  • For employees, this will mean that someone who is earning enough to take advantage of the improved £60,000 annual allowance will almost certainly trigger the taper, and therefore never benefit from the extra headroom – unless the taper is reformed.

At-a-glance: Potential complications to LTA abolition

  • A range of outcomes.
  • Complicated taper remains, even though the threshold has risen slightly.
  • Fixed protection against lower LTAs might hurt those who want to resume contributions.
  • A third complication could be for those who took out fixed protection against the falling LTA in 2012, 2014 and 2016, and have as a result not made pension contributions for several years in order to preserve previous higher lifetime allowances. They might now consider resuming pension contributions.
  • However, making pension contributions will automatically result in fixed protection being lost, and this would result in tax-free cash reducing to the current level of £268,275.
  • A further risk in abandoning fixed protection is that a General Election is approaching and therefore there is some risk that a change of government could result in the reimposition of an LTA, so Labour’s reaction to these moves will be keenly watched.

Energy costs and duties

  • The Energy Price Guarantee across the UK will remain at £2500 a year for the typical household for an additional three months until June 2023. The planned increase to £3000 a year will now be implemented on 1 July 2023.
  • Alcohol duty rates are frozen until August 2023 and will then increase by RPI.
  • The 5p fuel duty cut is extended for 12 months and there will be no RPI increase in 2023/2024.

Welfare and work

  • 30 free hours per week will be available for working parents with children aged 9 months up to 3 years in England, where eligibility will match the existing 3 to 4 year-old 30 hours offer.
  • There will be an expansion of the midlife MOT Jobcentre Plus offer to reach more claimants aged over 50 through support sessions, improving the digital midlife MOT tool, and working with employers and pension providers to encourage signposting to the midlife MOT and related support.
  • Disability benefits reforms including plans to abolish the work capability assessment and to separate benefits entitlement from an individual’s ability to work.

Local government and investment zones

  • New devolution deals for Greater Manchester and the West Midlands giving local leaders greater control over local transport, employment, housing, innovation and net zero priorities.
  • 12 new investment zones to be launched in the West Midlands, Greater Manchester, the north-east, South Yorkshire, West Yorkshire, East Midlands, Teesside and Liverpool with at least one in Scotland, Wales and Northern Ireland. These will be knowledge-intensive growth clusters intended to drive the growth of at least one of our key future sectors – green industries, digital technologies, life sciences, creative industries and advanced manufacturing.

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