Jeremy Hunt will outline the Government’s spending plans and changes to tax policy in the Spring Budget on March 15th. It comes against a backdrop of the cost of living crisis and at a time when the Government is continuing to try to balance its books following the pandemic.
While Chancellor’s Autumn Statement relied on frozen tax allowances and thresholds for individuals as a means of raising tax revenue and hit businesses with increased costs, there is speculation as to whether his first Budget will be any kinder as the UK economy continues to face global and domestic headwinds.
Our experts will be analysing the impact of the Chancellor’s announcements in a special Spring Budget Webinar on Thursday 16th March but until then, here is a brief overview of what our tax and accountancy specialists anticipate might happen.
Will the Chancellor raise taxes?
Although the UK managed to narrowly avoid a recession in the last quarter, inflation still remains stubbornly high. It’s highly unlikely we will see much in the way of tax giveaways which would only fuel inflationary issues. It seems that in terms of big announcements, most of them have been made.
In November, as widely predicted, the Chancellor froze or reduced tax allowances and thresholds, including the personal tax allowance, the threshold for the top rate of income tax, and the Capital Gains Tax (CGT) allowance.
The Autumn Statement also reaffirmed that Corporation Tax rates would rise in April. This is one area where the Chancellor has come under increased pressure with businesses, industry bodies and even senior backbenchers urging him to lower the headline rate of Corporation Tax to ease the burden on business and encourage investment into the UK. The decision by AstraZeneca to build a £330m plant in Ireland rather than the UK has been cited as evidence of the fact that the UK’s tax regime is stifling investment, particularly as the company’s CEO stated the “discouraging” tax rate was behind their decision. Despite this, both Jeremy Hunt and Rishi Sunak have ruled out cancelling the 6% increase to the main rate of Corporation Tax in the Budget.
As it is expected the previously announced Corporation Tax rate changes will proceed without change, businesses will be hit by a double whammy when the generous super deduction tax relief ends on March 31. There is however some speculation the Chancellor may announce a successor scheme.
When it comes to personal finance, pensions have been heavily targeted in recent years with reductions on both annual input and lifetime allowance and there is speculation that ISA allowances could be targeted in a similar way. This is especially pertinent for those with personal investment portfolios given that the Autumn Statement outlined the significant reduction in CGT and dividend allowances which will drag many investors into both paying more tax and self-assessment.
There is also some speculation that the increase in the State Pension age from 66 to 68 may happen sooner than expected – this is currently scheduled to take place from 2044 onwards.
Other speculated announcements include an extension to the 5p fuel duty cut for another year and a new tax on energy bills from 2025. There are also calls for a simplification of the tax-free childcare scheme.
The Energy Bills Discount Scheme, which supports businesses with energy costs from 1 April 2023 has already been announced and no further support is currently expected. However, the rumoured continuation of the Energy Price Guarantee for households, whilst widely speculated, is yet to be confirmed.
Rather than use the Budget to announce any major changes to current tax rates, the Chancellor may instead look to signpost tax reductions in future years (possibly with one eye on a looming General Election in 2025), rather than anything major for 2023/24. To that end, we should expect an update on the intentions to halve inflation, grow the economy and reduce public debt over the coming years, which will enable tax reduction in the future. A focus on ‘Enterprise, Education, Employment and Everywhere’ is likely to be reemphasised, but if there are any significant changes afoot, they are being kept under wraps for now.
Join our Spring Budget Analysis Webinar to hear how experts from our tax, financial services and accounting teams think the upcoming changes (or lack of) could impact you and your business.
