Steadying the ship
In this summary, we’ve explained the key developments and changes from the Chancellor’s Budget announcement on 15 March 2023. For a pdf version of our full March 2023 Budget Summary click the green download pdf button on the right.
- Background To The Budget
- Download Our Full Summary of The Budget
- Key Highlights From The Budget
- Final Thoughts – Can We Help?
Background to The Budget
The Spring Budget comes at an immensely challenging time, not helped by the political chaos of last Autumn. Keen to shore up the economy, the Chancellor repeatedly reiterated three priorities in the run-up to 15 March. Namely, to halve inflation (currently five times the Bank of England’s target of 2%), reduce the eyewatering UK national debt, and grow the economy.
This will not be a comfortable ride. In February, the Bank of England and the International Monetary Fund forecast a recession for the UK. However, the former suggested a less severe downturn in 2023 than its original predictions.
The country is also still gripped by a cost-of-living crisis, with wages struggling to keep up with inflation. Business investment is well below pre-Brexit referendum levels, and Bloomberg recently estimated that Brexit is costing the UK £100bn a year.
Glimmers of hope?
And yet in recent weeks, there have been tiny glimmers of hope. UK inflation fell for the third consecutive month in February (mainly due to the drop in fuel prices). Even though the UK workforce is far from its pre-pandemic size, there are signs that living costs are driving more people back into work. Unemployment had been edging up but is still relatively low compared to most previous periods.
In January the Government found it had a surprise surplus in its finances. Ofgem’s lower energy price cap announcement in February also meant the Government would pay less compensation to energy suppliers.
It will be interesting to see what interest rate the Bank of England’s Monetary Policy Committee sets when it meets on 21 March. Some feel the rises of recent months may have peaked.
Growing the economy
While early indications suggest progress in reducing inflation, the greater challenges for the Chancellor lie with his remaining two ambitions. Reducing national debt means replenishing Treasury funds at a time when many people are struggling financially. Growing the economy will need Government support to tackle the current labour and skills shortages, and energy bills. The CBI had said that greater help is needed to unlock business investment and also to build energy resilience in businesses ahead of next winter.
In our Budget Summary, we have given both overviews and detailed information for personal, business and property-related taxes.
Key highlights from the March 2023 Budget
- The lifetime allowance (LTA) for pensions has effectively been abolished from 2023/24.
- The annual allowance for pensions will be increased by 50% to a maximum of £60,000 from 2023/24 and the money purchase annual allowance (MPAA) will rise from £4,000 to £10,000.
- Companies investing in new plant and machinery in the three years from 1 April 2023 can claim a first year allowance of up to 100% of expenditure.
- SMEs that spend 40% or more of their total expenditure on R&D can claim a tax credit worth £27 for every £100 they spend from April 2023.
- Changes were announced to the film, high-end television, animation, children’s television and video games tax relief regimes, as well as those for other creative industries.
- The energy price guarantee is maintained at the current £2,500 level until the end of June 2023.
- Up to 30 hours of free childcare will be available to working parents of children from the age of nine months by September 2025. Initially, from April 2024, working parents of two-year-olds will be able to access 15 hours of free childcare per week.
- The scheduled 11p a litre duty increases in petrol and diesel will not go ahead.
- The Office for Budget Responsibility forecasts that the CPI inflation rate will fall from the current 10.1% (January 2023) to just 2.9% by the end of the year.
As The Treasury releases more detail from the Budget announcements, we will assess the implications for our clients. We will share our conclusions and advice on our website, in our Shipshape magazines, our Tax Facts card and in our conversations with clients.
In the meantime, if you wish to discuss how this Budget impacts you, please do talk with your usual Shipleys’ contact. Our key focus remains to help our clients navigate the changes smoothly and comfortably.
This Budget Summary is based on the Chancellor’s Budget Statement on 15 March 2023, supplemented by information from official publications.
It reflects our understanding of proposed changes to tax law and practice at the date of publication but is not a complete and definitive guide. The Budget proposals may be amended before the Finance Bill becomes law.
Specific advice should therefore be obtained before taking action, or refraining from taking action, on the basis of this information.
© 2023 Shipleys LLP