As spring is on its way, so is the Spring Budget 2023! With the economy in major recovery mode, and a further hike to the Energy Price Guarantee (EPG) set to transpire in April, this Spring Budget will be crucial for every household in the UK.
Below we estimate what the Chancellor will announce on 15th March 2023:
Business Tax Changes
Despite growing pressure from Conservative MPs, the Chancellor has reportedly ruled out tax cuts in the Spring Budget. The main rate of corporation tax however is set to rise to 25% from 1st April 2023. This means that the UK will be seen as a less attractive location for international businesses. Therefore, the chancellor will no doubt put together a package of measures to ensure international, and UK businesses, will want to trade within the UK. This could perhaps come in the form of announcing future tax cuts over a lengthy scheduled period.
As well as this, a recent fixed period tax break (eg for their first five years of trading) in Spain could provide food for thought for Mr Hunt. The tax break is to encourage international entrepreneurs to set up businesses in their country. A similar measure may be taken up by the Chancellor, especially with corporation tax rising. It’s unquestionable that UK business are in need of some form of incentive support package.
Anti-tax avoidance measures may also prove to be a likely announcement. An estimated tax gap of £32 billion remains one of the government’s top priorities in raising revenue for the economy. One way this could be done is enforcing action against the estimated 10,000 or more overseas companies owning UK residential property who did not register with Companies House by the 31 January 2023 deadline.
Energy Price Cap Increase
Despite the ongoing economic pressures related to the cost of living crisis, the energy bill price cap increase is likely to go ahead from April. This means businesses will get a discount on wholesale prices of gas and electricity, as opposed to a fixed price. The Energy Bills Discount Scheme (EBDS) is set to run until 31st March 2024.
Some businesses who are considered energy intensive will be eligible for a higher discount. These libraries, museums, and certain other manufacturers. Businesses will only benefit from the new scheme when energy bills are high. This remains a problem for physical activity related businesses. Under the criteria, they are not considered vulnerable to high energy prices. This therefore means they will be prone to high costs not covered by the EBDS.
There have been growing calls within the industry for more support. These include swimming pools, leisure centres, and gyms. The Chancellor is expected to outline in fine detail the new Energy Bills Discount Scheme in the Spring Budget. The EBDS will be replacing the Energy Bill Relief Scheme.
In terms of the energy price cap for households, this will increase to £3,000 per year, or £250 a month. Further cost of living payments are already planned for the rest of this year into the start of 2024. These will be £900 for those on means-tested benefits, £300 for pensioners, and £150 for individuals on disability benefit.
Childcare Costs Support
It was recently reported that free childcare could be extended to under-twos in England. Presently, all children aged three and four are entitled to 15 hours of free childcare a week. If you or your partner are in work, earn at least the national minimum wage or living wage, and neither parent earning more than £100,000 a year are entitled to 30 hours free childcare.
New plans are allegedly being considered by government, with free 30-hours-a-week entitlement predicted to expand to children between nine months and three years old. The reason behind this supposed measure is to get more people back into employment, including young people, new parents and recently retired. The expansion is estimated to cost up to £10bn and is just one option being considered by the government to help parents get back to work.
State Pension Age Brought Forward
The government have made their intentions clear in attempting to get people who have taken early retirement back into employment. There are mutterings that the confirmed increase to the state pension age could be brought forward. Currently, the age at which you can access your state pension is at 66. This is set to gradually increase to 67 by 2028, before slowly going up to 68 between 2044 and 2046.
Rumours are that the Chancellor could announce a review into the state pension age, recommending the increase to 68 be moved forward to the mid-2030. Scheduling the state pension age rise forward enables some workers to miss out on a full year of state pension payments. This is estimated to be £13,594 for workers aged 57 and £16,902 for workers aged 46.
Furthermore, this reported announcement could potentially have repercussions on workplace pensions. If you wanted to retire before 68, you’d be forced to withdraw money from a private pension earlier.
We hope this has outlined to you some of the predictions of what the Chancellor will announce in the Spring Budget 2023. If you’d like to know any further information on anything mentioned, or anything accounting related for that matter, please do not hesitate to get in contact with us at Abbey Accountants.