Today the Chancellor laid out a ‘Budget for Growth ’. The economic and political environment is more favourable for the Chancellor now than it was at the time of the Autumn Statement.
However, Jeremy Hunt remained relatively constrained in his outlook. With a General Election approaching in 2025, some of the longer term measures announced may not come to fruition.
Highlights included:
- The Office for Budget Responsibility (‘OBR’) now predicts that the UK will avoid recession in 2023, with inflation predicted to fall to 2.9% by the end of the year
- The Lifetime Allowance tax charge – currently chargeable where pension savings exceed the lifetime allowance of £1.07m – to be removed and the annual allowance for pension contributions to rise from £40,000 to £60,000 from April 2023
- The Lifetime Allowance will be abolished in a future Finance Bill
- The adjusted income threshold for the Tapered Annual Allowance will be increased from £240,000 to £260,000 and the minimum Tapered Annual Allowance will increase from £4,000 to £10,000 from April 2023
- Personal tax thresholds and ISA allowances remain unchanged
- The corporation tax rate will increase from 19% to 25% as planned from April 2023
- Companies will be able to deduct investment in machinery and technology from taxable income – full capital deduction
- Government support on Energy has been extended by three months, with additional support to bring charges for customers on prepayment meters in line with customers paying by direct debit
- There will be increased investment and focus on carbon capture and storage and nuclear energy
- Defence spending will be increased by £11bn over the next five years
- A £2.5bn investment in quantum computing and a £1m annual ‘Manchester Prize’ for the person or team doing the most ground-breaking Artificial Intelligence research in the UK for the next 10 years
- Encouragement and incentives for economically inactive people to return to the workforce
- Significant increase in the cap on childcare support for families receiving universal credit
- A new voluntary employment scheme assisting disabled people to enter work – Universal Support
- Stricter requirements on looking for work through an increase in the Administrative Earnings Threshold (for those working <18 hours a week) and improved application of Universal Credit sanctions
- New fitness-to-work testing required to qualify for health-related benefits
- Extension of funded childcare to all children over the age of 9 months from April 2025
- Should this measure be implemented, there is potential to save working families up to 60% of their current childcare cost
Risk warnings
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