Like any government announcement, the Spring Budget had its fair share of whispers doing the rounds about what it may entail. With plenty of build-up, the Chancellor delivered a speech focused on four key areas, which he referred to as the four E’s.
The first of those E’s being around increasing employment with the aim of raising living standards and helping businesses, and thus the economy, grow. Enterprise is an additional focus, with the government wanting to attract and support the most dynamic and productive companies, closely aligned to the first ‘E’ of employment & the silent ‘E’ of the economy and its need for growth. Education will be the backbone of the first two ‘E’s, giving people the knowledge and the skills they need to get the jobs they want and be part of those enterprises referred to earlier, with a gradual extension of free childcare for the under 3’s. Lastly, the fourth ‘E’ of everywhere, with the levelling up programme and the importance of spreading prosperity & opportunity, so that the whole of the United Kingdom can play their part in the Chancellor’s plan for growth.
According to the Office of Budget Responsibility (OBR) the UK will no longer experience a technical recession and inflation is expected to fall to 2.9% by the end of 2023.
The Policies & Insights
Following on from Jeremy Hunt’s piece about what the strategy was for growth, his next step was to outline how policies were to change or new policies were to be put before parliament, with a huge emphasis on pensions.
The removal of the lifetime allowance charge from April 2023, and the abolition of the lifetime allowance from the financial year 6th of April 2023, is a huge policy. The main driver behind this policy is to get people back in work, specifically NHS staff who have been affected by pension rules as well as people who have retired before their state retirement age. The narrative following this has been that this will only benefit the wealthy, with the lifetime allowance having been £1m or above since 2011. Other changes include a cap on the amount of tax-free cash that a member of a pension scheme can have has been added as 25% of the previous lifetime allowance, an increase to annual allowance rules as well as a change to public sector pension rules will come into place in April 2023. This should alleviate some of the challenges doctors and other senior NHS staff have with tax liabilities on their pension inputs.
There have been no tax rate changes, with those announced by Jeremy Hunt in the latter part of 2022 staying in place, including Corporation Tax. This increase in Corporation Tax will come into effect as of 1st April 2023, and a new and unrestricted immediate investment allowance for expenditure made by companies on qualifying IT, plant and machinery announced too.
From 6 April 2023, companies will be able to raise up to £250,000 of SEIS investment, a two-thirds increase. To enable more companies to use SEIS, the gross asset limit will be increased to £350,000 and the age limit from two to three years. To support these increases, the annual investor limit will be doubled to £200,000. This should help address the enterprise element of the budget, with start-ups receiving support, as well as investors.
For Business Owners, especially of SMEs, there is a lot to take in. There have been changes in allowances within a business, as well as externally, meaning insight and planning are even more key than before. We have also seen tax changes for businesses as well as for individuals such as a reduction in dividend allowance, which means it is a chaotic time to be a business owner.
The Budget – What Effect has it had?
It was William Blake who said, ‘foresight is a wonderful thing, but hindsight is better’, and it is much like that when looking at the effects of budgets. Forecasting is a huge process when The Treasury plan for a budget, but at a time of worldwide challenge on a number of fronts, the budget seems even more important than ever before.
What we can look at is what was perhaps missing from the budget that would have been welcomed, as well as some of the reactions.
The Chancellor intends to respond to the US Inflation Reduction Act, which includes a broad package of tax credits to support businesses and individuals to meet green targets, but this has been put back until the Autumn statement. There was little mention or reform of the apprenticeship levy, which given the ‘E’ of education & enterprise as well as the levy coming under criticism for being too rigid, according to the CBI, is surprising to see not reformed or altered for more benefit to businesses.
The reaction from pressure groups has been mixed, with many praising the action taken by The Treasury, however in equal measure, criticism has been received around certain areas not being addressed, especially around jobs & the economy. The budget for growth, as this Spring budget was dubbed, appears to be some of the ways there, but hindsight will provide all the answers as to whether it delivers that, and if so, for how long.
by Piers Norton, Wealth Manager at Coronation Wealth Management
To find out more about Piers, you can head over to the Coronation Wealth website: https://coronationwealth.co.uk/partner/piersnorton
