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Spring Budget 2023 what to expect

20th Feb 2023
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The next Budget, which sets out the Government's tax and spending blueprints, will be held on 15th March 2023.

Spring Budget 2023 what to expect | Futrli by Sage | Image of the Chancellor of the Exchequer's red budget box
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Will Chancellor Jeremy Hunt's speech echo his first last November: a sombre affair filled with talk of tax allowance freezes and bands to raise future tax revenue?

Or will the Chancellor be keen to demonstrate they are the party of low taxation, as top ministers often emphasise in speeches and interviews?

Business tax 

With the main rate of corporation tax rising to 25% for the most profitable companies from 1 April, the UK's allure to foreign businesses is likely to diminish, which means the Government needs to think about alternative incentives. 

To that end, the Chancellor might allay apprehensions about the tax hike and instil certainty around business planning by introducing some form of corporate tax roadmap.

Furthermore, the Chancellor may announce a host of business investments to mitigate the impact of additional taxes. The Government has already consulted on methods to simplify the administrative complexities of foreign companies in the UK by considering allowing them to re-domicile in the UK. Hunt may disclose his decision on the matter during the Budget.

More concrete in our predictions is the introduction of 'investment zones' in underperforming areas that would offer businesses more lenient tax rules: Hunt spoke about these in a recent address to Bloomberg. While we don't know the precise tax incentives and grants available to businesses in these areas, clues come from Hunt's predecessor Kwasi Kwarteng. He had wanted select areas to provide total relief for stamp duty land tax, business rates and employers' National Insurance on salaries up to £50,270.

Additionally, the Chancellor might be considering an import levy that would apply to goods that are produced by generating high carbon emissions. The levy has been rumoured as part of a deal to help finance UK steel producers. 

We could also see changes to the windfall taxes on energy-producing companies after the Office for Budget Responsibility revealed they had not generated the tax revenues they expected. Could the Chancellor respond by tightening the rules, or will he accept lower revenues to signal his future approach to business taxation?

There has so far been no indication of whether businesses will see further business investment incentives, such as a replacement for the super-deduction or a transitional regime for the impending R&D relief changes.

 

Employment tax

Although UK employment is close to record highs, there are around 6.6 million people of working age not in full-time education or employment. At Bloomberg, Hunt said he would "look at the conditions necessary to make work worth your while".

Hunt is unlikely to set changes in stone immediately, but he may initiate consultations concerning reduced National Insurance contributions for returning workers and retraining funding instead. Yet, the Government may adopt a more coercive approach alongside these incentives. In fact, Hunt is rumoured to be considering increasing the state retirement age (to age 68 from as early as 2035) and raising the age at which people can access their personal pensions. 

 

Personal taxes

As part of Rishi Sunak's 2022 Spring Statement, the Treasury should have been scrutinising the many tax reliefs available in the UK to evaluate their efficacy. Hunt might consider ending certain reliefs with low uptakes, such as investors' relief from capital gains tax.

While political pressure to address the tax system for non-UK domiciled individuals exists, immediate reforms seem unlikely outside of an announcement of a public consultation on the matter. 

Lastly, major tax giveaways seem unlikely despite the Government's self-professed preference for low taxation, given its third priority in office: "we will make sure our national debt is falling". Because of this, we should expect tinkering with the tax regime to address perceived unfairness and unintended consequences — calls for the reintroduction of VAT-free shopping for tourists in the UK will probably have fallen on deaf ears at the Treasury, for example. 

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