March 21, 2023
by  Josh Sab

Spring Budget: What you need to know

Chancellor Jeremy Hunt has recently presented his first budget in the House of Commons, with a strong emphasis on encouraging those who have left their jobs to return to the workforce and promoting business investment. Here is a breakdown of the main announcements:

 

Fuel, Alcohol, Pensions, and Wages

The Chancellor announced that the cap on the amount that workers can accumulate in pensions savings over their lifetime before having to pay extra tax (currently £1.07m) will be abolished. Additionally, the tax-free yearly allowance for pension pots will rise from £40,000 to £60,000, which has been frozen for nine years.

The fuel duty will be frozen, and the 5p cut to fuel duty on petrol and diesel, due to end in April, will be kept for another year. However, alcohol taxes will rise in line with inflation from August, with new reliefs for beer, cider, and wine sold in pubs. The tax on tobacco will increase by 2% above inflation, and 6% above inflation for hand-rolling tobacco.

 

Energy Bills, Prepayment Meters, and Nuclear Power

The government will extend its subsidies that limit typical household energy bills to £2,500 a year for three more months until the end of June. Additionally, £200m will be allocated to bring energy charges for prepayment meters into line with prices for customers paying by direct debit, which affects 4m households. Furthermore, the Chancellor announced a commitment to invest £20bn over the next two decades on low-carbon energy projects, with a focus on carbon capture and storage.

Nuclear energy will be classed as environmentally sustainable for investment purposes, with a promise of more public funding. There will also be £63m to help leisure centres with rising swimming pool heating costs and invest in becoming more energy-efficient.

 

Childcare, Universal Credit, and Back to Work Plans

The Chancellor announced that 30 hours of free childcare for working parents in England will be expanded to cover one and two-year-olds and will be rolled out in stages from April 2024. Families on universal credit will receive childcare support up front instead of in arrears, and the £646-a-month per child cap will be raised to £951. Furthermore, there will be £600 "incentive payments" for those becoming childminders, and relaxed rules in England to let childminders look after more children. There will also be a new fitness-to-work testing regime to qualify for health-related benefits and a new voluntary employment scheme for disabled people in England and Wales called Universal Support.

Tougher requirements will be implemented to look for work, and increased job support will be given to lead childcarers on universal credit. There will be £63m for programs to encourage retirees over 50 to return to work, "returnships," and skills boot camps. Immigration rules will also be relaxed for five roles in the construction sector to ease labour shortages.

 

Government Debt, Inflation, and Economic Growth

The Office for Budget Responsibility predicts that the UK will avoid a recession in 2023, but the economy will shrink by 0.2%. Growth of 1.8% is predicted for next year, with 2.5% in 2025 and 2.1% in 2026. The UK's inflation rate is expected to fall to 2.9% by the end of this year, down from 10.7% in the last three months of 2022. Underlying debt is forecast to be 92.4% of GDP this year, rising to 93.7% in 2024.

Corporation Tax, Investment Zones, and Tax Breaks

Chancellor Jeremy Hunt's Budget announcement included changes to corporation tax, investment zones, and tax breaks aimed at boosting business investment.

The main rate of corporation tax, which is paid by businesses on taxable profits over £250,000, will increase from 19% to 25%. However, companies with profits between £50,000 and £250,000 will pay between 19% and 25%. The government has also allowed companies to deduct investments in new machinery and technology to lower their taxable profits.

To support the creation of new businesses, the government has announced tax breaks and other benefits for 12 new investment zones across the UK. Each zone will receive £80m over the next five years to fund infrastructure improvements and support job creation.

Reduced paperwork for international traders and longer submission times for customs forms under streamlined rules were also announced. These measures aim to make international trade easier and more accessible to UK businesses.

These changes are designed to encourage businesses to invest and grow, ultimately stimulating economic growth and job creation across the country.

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