Spring Budget 2023

The Chancellor, Jeremy Hunt, has today delivered the Spring Budget as a budget for growth which is long-term and sustainable. It aims to remove obstacles for business investment while tackling labour shortages, barriers to work, and barriers to British inginuity. This is a budget with a substantial amount to unpack, but what does it actually mean for you?

The good news from the Office for Budget Responsibility (OBR) is that the UK will not enter recession this year. Forecasts predict that the high inflation we have seen, peaking at 10.7% in the final quarter of last year, will fall to 2.9% by the end of 2023. However, this was tempered by the slight improvement forecast in GDP growth, with the UK still lagging behind growth rates of other major economies. In the forecast period following this year the UK economy will grow by 1.8% in 2024, 2.5% in 2025, 2.1% in 2026, and 1.9% in 2027 - this year seeing a contraction of 0.2%.

With personal finances being put under real pressure, economic inactivity and low growth, there were a number of measures and support packages announced. However, although a lot of money is being spent, we did not see any tax cuts which would immediately alleviate the cost of living crisis for ordinary households or combat the affects of fiscal drag - where people pay a larger part of their income in tax, because the government does not increase the levels at which people pay tax at the same rate as that at which inflation is increasing.

The Budget at a Glance

The energy price guarantee will stay at £2,500 for next three months until June.

The rates charged for pre-pay energy meters will be brought in line with rates for those who pay by direct debit. This will stop those in the most need being unfairly penalised.

£100 million in support to local charities and organisations.

The duty on alcohol will be frozen and the duty on draught products (beer and cider) in pubs will be up to 11p lower than supermarkets, the Chancellor's 'Brexit Pubs Guarantee'.

Fuel duty will be frozen, and the fuel duty cut maintained for another 12 months.

Corporation tax increased from 19% to 25%.

ISA limits will be kept the same. The current limit is £20,000 for an ISA in 2022/23. The £20,000 limit has been in place since 2017/18.

The pension tax free allowance has been increased from £40,000 to £60,000 and the lifetime allowance of £1 million has been abolished.

Older people are being enticed back into the work force with apprenticeships for over 50s.

£400 million will be allocated to help support workers with mental health and back pain.

A new £600 incentive for childminders entering the profession, and £1,200 for those joining an agency.

Every child over 9 months will receive 30 hours of free child care following a staged introduction to the scheme. This will help bolster the UK’s workforce. The phased plan aimed at removing barriers to work, which will be fully introduced by September 2025, will be worth up to £6,500 a year for working families.

An expansion in wrap-around care at the start and finish of the school day for parents with older children and changes to staff-to-child ratios in England to expand supply of childcare. The Chancellor said that almost half of non-working mothers said they would prefer to work if they could arrange suitable childcare.

Help for 700,000 parents on Universal Credit who had limited requirements to look for work due to upfront childcare costs. This will be paid upfront by the government with an increase to the maximum they can claim to £951 for one child and £1,630 for two children, an increase of almost 50%.

£11 billion will be allocated to the defence budget over next 5 years, and will be 2.25% of GDP by 2025.

£30 million in support to ex-servicemen and women.

Announcement of 12 new investment zones in the UK, with £80 million in support for each.

Funding to be provided for local regeneration, transport, and to fix potholes.

Full capital expensing for next 3 years, where each pound invested in equipment and IT can be deducted from taxable profits.

Enhanced credit for R&D by small and medium businesses.

Reliefs extended for creative industries.

£20 billion in support for carbon capture usage and storage schemes, designed to create jobs across the country.

Nuclear power will be classed as environmentally sustainable and will incentivise private investment in the sector.

Nuclear small module reactor competition with any suitable projects eligible for cofunding by the government.

A hub for AI in the UK to be built. The chancellor set out a £1 million prize each year for ten years for innovation in the sector.

Reform regulations around medicines and medical technologies for those already approved by trusted countries to streamline processes and drive innovation.