As we get ready for a new Tax Year, the Spring Budget is something we and many self-employed freelancers, contractors, sole traders and small businesses have marked on the calendar.
Chancellor Jeremy Hunt today delivered his Spring Budget, and it was as he called it – “A budget for growth”.
Overall the outlook for the UK economy in 2023-24 is definitely looking more positive, with the aim to half inflation, reduce debt and get the economy moving with “prosperity with a purpose”.
One of the most important take aways from today’s budget, and great news for small businesses up and down the country, is that the UK is expected to avoid a technical recession in 2023. The forecast meet the priorities to get the economy growing – “we are following the plan and the plan is working”.
Jeremy Hunt is just the second of the last five chancellors to actually hold the famous red box outside Number 11 this morning. One of the key things Chancellor Jeremy Hunt set out in today’s Budget was his plan for economic growth.
With five chancellors in post for less than four years in total, with an average tenure of nine months, we’ve seen U-turns and uncertainty over that time. To put that into context, the previous five chancellors to them were in place over a 26-year period. Jeremy Hunt today set out to reassure the UK of normality and stability – “proving the doubters wrong”.
Although the UK is the only G7 economy which is still smaller than it was before the Covid pandemic, even after growing 4% last year, we can certainly take a lot of positives from the Treasury’s announcements today and Jeremy Hunt said the UK economy is on the “right track”.
The government is on track, with underlying debt to be 92.4% of GDP by next year, falling every year after until 2027-28. Hunt added that underlying debt in three years’ time is forecast to be lower than it was in the autumn of last year.
Jeremy Hunt set his Budget out in three categories –
Priority 1 – help with cost of living crisis
Priority 2 – reduce debt
Priority 3 – grow the economy
Let’s take a look at what will affect you going into the 2023-24 tax year…
Inflation is set to fall to 2.9% by the end of the year
Great news for everyone is that the rate of price rises, or inflation, is forecast to fall to 2.9% from 10.7%.
Economy forecast to grow by 1.8% next year
After this year the UK economy will grow in every single year of the forecast period – by 1.8% in 2024, 2.5% in 2025, 2.1% in 2026 and 1.9% in 2027.
Energy bill support
The Energy Price Guarantee will remain at £2,500 for the typical household for the next three months. This means that the average family will save a further £160 on top of the support measures already in place.
Small Business Investment increased to £1m
The Annual Investment Allowance has increased to £1m for small businesses, meaning 99% of all businesses can deduct the full value of all their investment from that year’s taxable profits. This new policy aims to see full capital expensing for the next 3 years, with an intention to make it permanent as soon as responsibly possible. This means every £1 a company invests in IT equipment, plant or machinery can be deducted in full and immediately from taxable profits.
Tax boost for smaller and medium businesses
The chancellor has announced that 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 and Development.
12 new Investment Zones
The government said the scheme, which is backed by £80m of investment over five years in each of the new high-growth zones, is designed to accelerate research and development in the UK’s “most budding industries”. They will be spread across the West Midlands, Greater Manchester, the North East, South Yorkshire, West Yorkshire, East Midlands, Teesside and Liverpool. There will also be at least one in each of Scotland, Wales and Northern Ireland.
Corporation tax to increase to 25%
Corporation tax for businesses is to increase from 19% to 25%. Firms which make a profit of more than £250,000 will pay 25% tax on their profits from April.
Extending a cut to fuel duty
To help households under pressure from living costs, Fuel duty will remain frozen and the 5p reduction will be maintained for a further year. This will save the average motorist £100 next year.
“Returnerships” for Over 50s wanting to re-enter the workplace
3.5m people of pre-retirement age but over 50 are not working. Jeremy Hunt claimed that “Older people are the most skilled and experienced people we have” and “no country can thrive if it turns its back on such a wealth of talent and ability”. A new apprenticeship scheme for over 50s that want to return to work called “returnerships”.
Pension Taxes
The chancellor has abolished lifetime allowance on amount workers can save in pensions without paying tax. Hunt says he will increase the pensions annual tax-free allowance from £40,000 to £60,000 and will abolish the Lifetime Allowance – previously set at £1.07m.
Free childcare for working parents
To help parents get back to work, starting from April 2024, every child over 9 months will receive 30 hours of free childcare per week. Government will pay the costs upfront and increase funding by 30% per year. Incentives of £600 for those that move into the childcare profession.
On top of this, there will be funding for schools to provide wraparound care so children can be dropped off and picked up from 8am to 6pm.
Other key takeaways
- Defence spending to increase by £11b over the next 5 years
- £63m fund to keep public leisure centres and pools afloat
- The Voluntary sector will get money to help with suicide prevention, assigning £10m for the next 10 years.
- Jeremy Hunt allocated £400m in funding to increase the availability of mental health and musculoskeletal resources for workers.
- Universal Credit sanctions to be ‘applied more rigorously’
- Duty on pint is frozen- from August 1st, duty on draught products in pubs will be 11p lower than the duty in supermarkets.
- Potholes fund increased by £200m
How Gorilla can help you
Our expert accountants are on-hand to answer any queries you have regarding the budget. If you’re looking for expert advice around the complexities of tax and accounting compliance, and need someone who you can rely on with your finances, Gorilla Accounting are specialists in your field. Contact us today, or join us here.
You can find out more about how the Spring Budget and new tax year will affect you in our webinar with Mettle, the free business bank account by NatWest. And if you work as a Locum Pharmacist, watch our webinar with Tohidul Islam from the Pharmacy Lounge Podcast to learn how the changes in the Spring Budget could impact you.
