Further to the chancellor Jeremy Hunt’s announcements in the Budget 2023 earlier today, we have detailed below some key changes coming into effect;
- The pensions annual tax-free allowance will increase from £40,000pa to £60,000pa – a 50% increase from April 2024, having been frozen for 9 years.
- The pension lifetime allowance, previously set at £1.07m will be scrapped.
- The tax-free personal allowance, currently set at £12,570, is frozen until 2028.
- Fuel duty frozen – the 5p cut to fuel duty on petrol and diesel, due to end in April, has been kept for another year
- Alcohol taxes to rise in line with inflation from August, with new reliefs for beer, cider and wine sold in pubs
- The rate of corporation tax for businesses with a profit of more than £250,000 increases to 25%. Companies with profits between £50,000 and £250,000 to pay between 19% and 25%, and Companies with profits under £50,000 will continue to pay 19%.
- ‘Full expensing’ will be introduced for the next three years, which means that every single pound a company invests in IT equipment, plant or machinery can be deducted in full and immediately from taxable profits. The Annual Investment Allowance will remain at £1m per year.
- Small or medium-sized businesses will be able to claim a credit worth £27 for every £100 they spend if they spend 40% or more of their total expenditure on Research & Development.
Other Key Points
- The cap on energy bills will continue for a further 3 months, but will rise from £2,500 to £3,000 from July 2023. Without this help, average bills would have gone up to about £3,740, according to analyst estimates.
- Energy charges for prepayment meters will be brought into line with prices for customers paying by direct debit
- 30 hours of free childcare for working parents in England expanded to cover one and two-year-olds, to be rolled out in stages from April 2024
- £63m for programs to encourage retirees over 50 back to work, ‘returnerships’ and skills boot camps
- UK’s inflation rate is predicted to fall to 2.9% by the end of this year, down from 10.7% in the last three months of 2022.
Purpose of the Budget 2023
In the United Kingdom, the Chancellor’s budget refers to the annual financial statement presented by the Chancellor of the Exchequer, who is the government official responsible for economic and financial matters. The purpose of the Chancellor’s budget is to outline the government’s fiscal policy and spending plans for the upcoming year.
The budget is a crucial part of the government’s economic strategy and provides an opportunity for the Chancellor to announce tax changes, spending priorities, and economic forecasts. It serves several purposes:
- Economic management: The budget sets out the government’s plans for managing the economy, including measures to stimulate growth, control inflation, and reduce the budget deficit. It includes forecasts for economic indicators like GDP growth, inflation, and unemployment.
- Revenue generation: The budget outlines changes in tax policy, including proposals for income tax, corporate tax, value-added tax (VAT), and other levies. These changes aim to generate revenue for the government and fund public spending priorities.
- Public spending priorities: The Chancellor’s budget allocates funds to different government departments and programs. It identifies spending priorities in areas such as healthcare, education, defense, infrastructure, and welfare. The budget also outlines any planned cuts or increases in public spending.
- Redistribution of wealth: The budget can include measures to redistribute wealth and promote social and economic equity. This may involve changes in tax rates, tax credits, welfare benefits, and other policies aimed at reducing income inequality and supporting disadvantaged groups.
- Confidence and stability: The budget announcement provides an opportunity for the Chancellor to communicate the government’s economic strategy and reassure investors, businesses, and the public about the state of the economy. It aims to create a sense of stability and confidence in the country’s financial future.
Overall, the Chancellor’s budget plays a crucial role in shaping the government’s economic policies, revenue generation, public spending priorities, and the overall direction of the UK’s economy.