Back to Work Budget Update

Well, Jeremy Hunt has announced the UK Budget for 2023 and here are the main takeaways you need to be aware of:

  • The main rate of corporation tax, paid by businesses on taxable profits over £250,000, confirmed to increase from 19% to 25%
  • Companies able to deduct investment in new machinery and technology to lower their taxable profits
  • Tax breaks and other benefits for 12 new Investment Zones across the UK, funded by £80m each over the next five years
  • The cap on the amount workers can accumulate in pensions savings over their lifetime before having to pay extra tax – currently £1.07m – will be abolished
  • The tax-free yearly allowance for pension pots is to rise from £40,000 to £60,000 – having been frozen for nine years
  • Government subsidies limiting typical household energy bills to £2,500 a year will be extended for three months, until the end of June
  • Energy charges for prepayment meters will be brought into line with prices for customers paying by direct debit
  • Office for Budget Responsibility predicts the UK will avoid recession in 2023, but the economy will shrink by 0.2%
  • Growth of 1.8% predicted for next year, with 2.5% in 2025 and 2.1% in 2026
  • UK’s inflation rate predicted to fall to 2.9% by the end of this year, down from 10.7% in the last three months of 2022
  • Underlying debt forecast to be 92.4% of GDP this year, rising to 93.7% in 2024

One of the more noteworthy points is the changes to capital allowances for SMEs. These changes will take over from the current 130% super deduction:

  • From April 2023 until the end of March 2026, companies can claim 100% capital allowances on qualifying plant and machinery investments.
  • Full expensing allows companies to write off the cost of investment in one go.
  • Under full expensing, for every pound a company invests, their taxes are cut by up to 25p.

This budget is being referred to as the Back to Work Budget, and it’s easy to see why. The intention appears to be to encourage the UK to work more, work longer and to invest in their businesses. We’ll see how it plays out!