In association with
Save content
Have you found this content useful? Use the button above to save it to your profile.
Spring Budget 2023 red book
Flickr_HMTreasury

Spring Budget unveils ‘back to work’ tax measures

by

The Chancellor today used his “back to work” Spring Budget to lift the cap on tax-free pension contributions, freeze fuel duty and unveil the 100% ‘full expensing’ tax relief but he didn’t budge on the corporation tax hike. 

15th Mar 2023
In association with
Save content
Have you found this content useful? Use the button above to save it to your profile.

Jeremy Hunt’s unflashy fiscal conservatism was on display today, delivering a Spring Budget that was light on tax cuts but instead focused on “back to work” initiatives, growing the economy and rejecting the “narrative of decline”. 

Some of the headline measures Hunt set out to drive economic growth across the UK included boosting the annual allowance for pension contributions from £40,000 to £60,000 as well as abolishing the pensions lifetime allowance to encourage older workers to stay within the workforce. 

He also increased the amount of universal credit parents can claim for childcare and provided more free childcare hours for younger children, which may encourage parents to return to work. 

“In the autumn we took difficult decisions to deliver stability and sound money. Today, we deliver the next part of our plan: a Budget for growth. Not just growth from emerging out of a downturn. But long-term, sustainable, healthy growth,” said Hunt. 

Businesses expecting a reversal of the corporation tax increase from 19% to 25% were left disappointed, although the Chancellor tried to dampen the blow by replacing the super deduction scheme with a 100% full expensing tax relief for the next three years.

“If the super deduction was allowed to end without a replacement, we would have fallen down the international league tables on tax competitiveness and damaged growth. As a Conservative, I could not allow that to happen,” said Hunt. 

Elsewhere, Hunt also partially backtracked on his decision in the Autumn Statement to cut R&D tax credits by restoring the relief with an “enhanced credit” but it will be restricted to sectors like fintech and artificial intelligence. 

Tax measures

Here are the main measures announced by Hunt: 

  • Raised the £40,000 annual cap on pension contributions to £60,000
  • Abolished the [pensions] lifetime allowance 
  • Announced 12 new Investment Zones to drive business investment 
  • Full expensing tax relief will come in from 1 April
  • Froze road fuel duty and retained the recent 5p cut in petrol and diesel duty for 12 months
  • Criminal charges for promoters of tax avoidance – new consultation
  • The Energy Price Guarantee kept at £2,500 for an additional three months
  • Froze duty on average strength draught beer sold in pubs across the UK 
  • Introduced a new apprenticeship – the “returnership” for over 50s
  • Alcohol duty to rise with inflation.

Back to work

Dubbed the “back to work” Budget, the Chancellor is placing his bets on discouraging workers over 50 from retiring early by increasing the cap on the annual allowance for pension contributions and removing the lifetime allowance for all.

While critics have said the announcement will only benefit a small number of rich people, Hunt is hoping the pension tweaks will encourage senior NHS doctors and consultants to remain in the workforce. 

In another attempt to encourage people back to work, Hunt increased the £646 a month per child support for universal credit claimants to a maximum of £951.

Businesses

Hunt resisted calls to reverse the increase to corporation tax from 19% to 25% for businesses making more than £250,000. In order to make this measure more palatable, Hunt announced a replacement for the super deduction scheme which concludes at the end of this month. 

The new scheme offers 100% full expensing for the next three years, with an intention of making it permanent. This will apply to plant, machinery and IT equipment at a cost of £9bn per year. 

“The impact on the economy will be huge,” said the Chancellor. “The Office for Budget Responsibility (OBR) says it will increase business investment by 3% every year it’s in place and gives us the most generous capital allowance regime of any advanced economy.” 

Hunt said the 100% “full expensing” tax relief will reduce businesses’ tax by up to 25p for every £1 they spend on plant and machinery.

The Chancellor also announced 12 new investment zones. Introducing the “12 potential Canary Wharfs”, Hunt has reconfigured one of the only measures to survive Liz Truss’s short premiership, by clustering these investment zones around research institutions such as universities.

Eight places shortlisted to host investment zones including West Midlands, Greater Manchester and Liverpool plus four more zones in Scotland, Wales and Northern Ireland. Each of these zones will receive £80m over five years and will benefit from tax and custom incentives. 

He also introduced an “enhanced” R&D credit, which allows eligible small or medium-sized businesses to claim £27 back for every £100 spent on R&D. 

Tax avoidance

The Budget red book also took aim at promoters of tax avoidance, promising an upcoming consultation. Alongside HMRC’s growing name and shame list of shady operators, the consultation will result in new measures to tackle rogue operators that refuse to stop promoting tax avoidance schemes. If found guilty in a court of law, they could serve prison time.  

“It is everyday people who lose out from tax avoidance, whether it’s individuals facing big bills after getting involved with harmful schemes or funding being taken away from public services,” said Hunt in a press release. 

Julia Kermode, the founder of the contractor network IWORK, said prison time could put a stop to people promoting these schemes, but urged Hunt to go further. “HMRC has a track record of pursuing workers for unpaid tax, even if they’ve been instructed to operate through a tax avoidance scheme. So, I’d like to see the liability shift, to those recommending these immoral schemes.

“And until concrete action is taken, thousands of contractors will continue being duped into tax avoidance. Worse still, they have no idea about it until it’s too late,” she said.

Also under the section of the red book entitled 'tackling the tax gap', the government plans on doubling the maximum sentences for the most egregious cases of tax fraud from seven to 14 years. 

HMRC has also been given £47.2m to improve its capability to manage tax debts. The red book said this extra funds will help the tax department "better distinguish between taxpayers who can afford to settle their tax debts but choose not to, from those who are temporarily unable to pay, ensuring taxpayers are offered the right support".

Economy

Hunt’s prudence is a step change after the catastrophic fallout of Kwasi Kwarteng’s chaotic mini-Budget. The Chancellor may have had limited room for tax breaks, but he used that space in the speech to talk up the economy after the UK avoided a technical recession at the end of last year and he said the UK economy is “on the right track”.   

According to the OBR, inflation will fall from 10.7% in the final quarter of last year to 2.9% by the end of 2023. 

“I report today on a British economy that is proving the doubters wrong,” said Hunt. “We took difficult decisions to deliver stability and sound money. Since mid-October 10-year gilts have fallen, debt servicing costs are down, mortgage rates are lower and inflation has peaked.”

The OBR’s report was a little more upbeat than its pessimistic outlook in November when it said the fall in living standards would be the biggest on record

The OBR revised its predictions in November that GDP will fall in 2023 by 1.4%; instead, the independent watchdog expects a contraction of 0.2% and that the UK economy will grow every year in the forecast period by 1.8%, 2.5% and 2.1%. 

Hunt also hoped by extending the energy price guarantee for an extra three months until June at £2,500, this change will “ease the pressure on families, while also helping to lower inflation too”.

“Today’s measures lead to a slightly lower overall tax burden for the rest of Parliament compared to the OBR forecasts,” said Hunt. 

What was missing? 

Rather than any big tax changes, this more “steady as she goes” Budget appeared to focus more on restoring market confidence without any flashy new tax measures. 

Despite calls from the Treasury committee for the Chancellor to reconsider the abolition of the Office of Tax Simplification, following a recent spirited defence of the independent group’s record to MPs from tax director Bill Dodwell and chair Kathryn Cearns, Hunt didn’t use his speech to resurrect the group. 

Labour has pledged to abolish non-domicile status and raise £3.2bn, but rather than steal the opposition’s attack line, and save the PM any more squirming everytime his wife’s former non-dom status is mentioned in Parliament, the Chancellor has seemingly decided against abolishing or amending the non-dom regime. 

And for the talk of this being the 'back to work' Budget, Qdos criticised the Chancellor for ignoring the IR35 legislation in his speech. "This smacks of irony in a so-called back to work Budget. The government wants retirees to return to work but won’t address the issues plaguing IR35 reform. These tax changes forced many freelancers and contractors into early retirement, at a huge cost to the economy." 

The accountancy bodies' calls before the Budget for the Chancellor to invest in HMRC service levels were also not answerered. The accountancy, bookkeeping, payroll and tax professional bodies urged Hunt treat improving customer service and the effectiveness at HMRC as his "top priority". But while HMRC received extra money to manage tax debts, the red book didn't allocate any extra funds to rectify the poor service levels and delivery at the tax department.  

Read more

PracticeWEB 2023 Budget Report Covers

Replies (35)

Please login or register to join the discussion.

avatar
By Casterbridge Hardy LLP
15th Mar 2023 13:49

I am scarcely able to maintain my excitement!

Thanks (3)
avatar
By TB93
15th Mar 2023 13:51

Funny how he thinks cutting duty on draught beer is a massive help to the general public. Gives you an idea of how they view us doesn't it.

Thanks (9)
Replying to TB93:
avatar
By johnjenkins
15th Mar 2023 14:32

For Weatherspoons drinkers it's a lottery win.

Thanks (0)
Replying to TB93:
By ireallyshouldknowthisbut
15th Mar 2023 14:50

TB93 wrote:

Funny how he thinks cutting duty on draught beer is a massive help to the general public. Gives you an idea of how they view us doesn't it.

Did they cut it? I thought they just didn't put it up by inflation. Which is a cut when its a tax, but not if its NHS wages.

Thanks (0)
avatar
By Eric T
15th Mar 2023 14:03

Just doff your cap to the squire and drink up. We know our place.

Thanks (8)
avatar
By petestar1969
15th Mar 2023 14:05

Hmm

Struggling to see the difference between 100% full expensing and 100% AIA. I'm sure there is one....

Criminal charges for tax avoidance promoters - does this include those partner adjustments, like a sudden decision to write down stock by 50%, or a sudden realisation that a client has done "R&D"?

Thanks (7)
Replying to petestar1969:
avatar
By Arcadia
15th Mar 2023 14:09

My favourite partner adjustment was debit sales credit drawings.

Thanks (1)
Replying to petestar1969:
By Nick Graves
15th Mar 2023 14:40

The reason I always ignore these pontificate speeches is that they stand up and talk complete garbage. The MTD conflation of turnover with income is a classic case in point.

The analysis by serious minds on Aweb et al post hoc is always much appreciated.

My favourite however was when Gordon Brown announced a VAT-rate hike, mic dropped and bravely ran away.

Thanks (1)
Replying to petestar1969:
avatar
By bendybod
15th Mar 2023 14:49

I'm glad I'm not the only one. It seems to be unlimited, whereas AIA is limited but if it is, essentially, replacing AIA then why not just do that.
Full expensing in the accounts? But then all that does, other than dramatically change the balance sheet, is make the accounting profit look more like the taxable profit. Doesn't change the taxable profit.
Nope, I'm lost...! Only two weeks to find out the answer!!

Thanks (0)
Replying to bendybod:
avatar
By petestar1969
15th Mar 2023 15:10

Of course full expensing through the accounts, which is what I thought he meant when he announced it, would torpedo the profit and restrict how much can be paid out as dividends...

BUT

As we all suspect, director/shareholders are meant to take salaries, not dividends, right?

Thanks (0)
Replying to petestar1969:
avatar
By lisa65
15th Mar 2023 16:27

The difference is explained here:

https://www.gov.uk/government/publications/full-expensing/spring-budget-... paragraph 4.

Full expensing is available to companies subject to Corporation Tax only. It does not apply to unincorporated businesses such as sole traders, partnerships etc. Such businesses can claim the AIA for qualifying capital equipment costing up to £1 million per year.

Full expensing does not apply to special rate expenditure either. For such expenditure, a 50% first-year allowance can be claimed. Capital allowances are available on the balance of expenditure at the rate of 6% of WDAs.

Thanks (1)
Replying to petestar1969:
avatar
By Catherine Newman
15th Mar 2023 17:23

I have been out all day but a client did tell me CT is going up to 25% (which for us it's not) and he asked what he could invest in.

I am struggling with this one too.

Thanks (0)
avatar
By Hugo Fair
15th Mar 2023 14:13

Of course the devil is always in the (currently missing) detail for all of it ... but

"Criminal charges for promoters of tax avoidance" is an interesting tidbit (well, except for the reference to a new consultation)!

Thanks (2)
Replying to Hugo Fair:
Tom Herbert
By Tom Herbert
15th Mar 2023 14:17

In the doc: https://assets.publishing.service.gov.uk/government/uploads/system/uploa...

"The government will consult shortly
on the introduction of a new criminal offence for promoters of tax avoidance who
fail to comply with a legal notice from HMRC to stop promoting a tax avoidance
scheme"

Thanks (2)
Replying to TomHerbert:
avatar
By Hugo Fair
15th Mar 2023 15:19

Thanks for the link ...that's a LOT of reading and without a sensible hyperlinked index (they obviously like to make you work for any information)!

Many of the items may be fairly minor and/or obscure, but it'll take some time (and several headache pills) to peruse it all properly.

Thanks (1)
avatar
By johnjenkins
15th Mar 2023 14:35

I bet Hunt banks at Barclays.

Thanks (1)
avatar
By Open all hours
15th Mar 2023 14:36

Think ‘unveil’ is a bit strong. Made notes for our client email yesterday and because it was all confirmed it’s not worth sending it.
Disgrace abuse of Commons procedure and tradition.
Taking an hour to read yesterdays media is a ridiculous waste of everybody’s time.

Thanks (0)
avatar
By Arcadia
15th Mar 2023 14:42

There is a consultation paper on HMRCs website about extending the use of the cash basis, possibly making it the default (with opt out). I don't think this was mentioned in the speech. Cash basis is described as a valuable simplification, whereas with all government simplifications, it is the opposite. Ask clients if they want to move to the cash basis to simplify things and their response is 'which option means less tax?' So you have to do both options to compare.

Thanks (2)
Replying to Arcadia:
avatar
By bendybod
15th Mar 2023 14:52

For all unincorporated businesses, or all businesses?
It does make it easier to explain to clients on the lower end of the understanding spectrum but whether it actually helps them to pay less tax??
A move to make it, theoretically, easier to do their own MTD returns?

Thanks (0)
By ireallyshouldknowthisbut
15th Mar 2023 14:51

Best bit i found was it seems to now be official policy that no MTD for sub £30k turnovers.

P53 of the costing document.

Thanks (2)
avatar
By Self-Employed and Happy
15th Mar 2023 15:16

So instead of maybe bowing to the doctors and doubling the lifetime pension allowance he abolishes it completely which obviously helps all those really poor friends of government.

I would have doubled the lifetime allowance but increased the tax even further if you go over the allowance.

Thanks (1)
Replying to Self-Employed and Happy:
paddle steamer
By DJKL
15th Mar 2023 15:29

Smart move- sucker them all into upping contributions/increasing pots and then some future chancellor (red or blue) can change things back/invent a new regime, meanwhile the assets are trapped in the pension pot.

Budget 2033- The Chancellor announces that all pension schemes will from 6th April 2033 require to invest (insert a number)% of their funds into (insert whatever pet project the government of the day has)schemes.

Thanks (0)
By jon_griffey
15th Mar 2023 15:56

Making promotors of tax schemes criminally liable is fine, but they should start by making anyone involved in these jointly and severally liable for the tax that is lost. This should include the promotors, trustees, bankers, dodgy KC's, accountants that get a referral commission, the tea boy. That should focus a few minds.

Thanks (2)
avatar
By tedbuck
15th Mar 2023 16:05

I really cannot think of a polite way to describe this budget. Absolute load of c**p is the nearest I can get.
The budget is on a par with his asinine grin. I never thought I'd see the day when I longed for a Labour Government. The only trouble is that they would be twenty times worse as most of them are completely clueless ............wait a minute doesn't that describe this lot of numpties as well?
And I thought Gordon Brown and George Osborne were the nadir of Chancellorship - just shows how wrong you can be.
I really can't think of a positive comment to make. Who on earth can we vote for at the next election?

Thanks (3)
Replying to tedbuck:
avatar
By johnjenkins
15th Mar 2023 16:13

My sentiments entirely. Perhaps Nigel and Tony should start an EUNONEU party. It would certainly get my vote.

Thanks (0)
avatar
By BryanS1958
15th Mar 2023 16:25

"He also introduced an “enhanced” R&D credit, which allows eligible small or medium-sized businesses to claim £27 back for every £100 spent on R&D"

Hardly seems worth the effort - only 2% more than a normal corporation tax deduction, post 31/3/23. And don't forget the R & D 'Consultants' will probably want 25% of the R % D tax credit, so the taxpayer will be worse off!

Thanks (0)
Replying to BryanS1958:
avatar
By Ian McTernan CTA
15th Mar 2023 16:58

Clearly you don't deal with R&D: the £27 is a payable amount, so the company can be making a loss (not unusual in start ups, etc) and can recover that £27.

If the R&D rules didn't exist they would recover £0, as they haven't paid any tax...

Thanks (0)
Replying to Ian McTernan CTA:
avatar
By BryanS1958
15th Mar 2023 17:09

I do deal with R & D. The £27 is the payable amount, using what would otherwise be a tax loss. So £100 of losses are used to get a £27 tax refund. If the company is not likely to make a profit then clearly a benefit.

But if the losses could be used against the following year's profits then the benefit seems to be 2%, plus cash flow, assuming the corporation tax rates remain at 25% - hardly very exciting as an incentive.

Thanks (0)
avatar
By BryanS1958
15th Mar 2023 16:25

Dup

Thanks (0)
Jennifer Adams
By Jennifer Adams
15th Mar 2023 16:26

Well.....that was the usual waste of space wasnt it?

I am searching but cant find anything to help those businesses which are supposedly the backbone of the country = SME's

And if I was a doctor etc on strike I would be more than livid. I thought we had no money?

This bit of the document made me groan...

"Spring Budget also includes a discussion document on modernising HMRC’s
Income Tax services so taxpayers can quickly and easily manage their own
tax affairs online, reducing the need to contact HMRC."

>> wasnt that supposed to be MTD?

Thanks (2)
boat
By SouthCoastAcc
15th Mar 2023 16:28

as said on the other thread now the 25% tax free lump is capped at the old limit, it will probably be eroded by fiscal drag by the time i retire

Thanks (0)
avatar
By Mr J Andrews
15th Mar 2023 16:44

It's all very well targeting promoters of Tax Avoidance - those clever enough to see legal ways around our increasingly complicated tax system - with votes at the uppermost of any Budget. { And nothing less than than a stint in prison should be the correct result for rogue schemes }.
Meanwhile, the Black Economy prospers. I guess we must continue to pretend this mind blowing Evasion doesn't exist in our country.

Thanks (0)
VAT
By Jason Croke
15th Mar 2023 16:53

Nothing on VAT, other than threshold frozen for 2 years from 2024, so that will probably drag a load more SME's into the VAT net.....with increasing costs, businesses will have to put up their prices and that means reaching that threshold a bit quicker than had it moved with inflation.

Not seeing how this budget is good for growth or business, lots of focus on personal tax (lifetime allowances and personal tax threshold) and apart from the R&D stuff, not seeing how anything can encourage an SME to grow.

Thanks (0)
avatar
By Catherine Newman
16th Mar 2023 08:28

I have a client who is a retired surgeon who has been affected by the Lifetime Allowance and will not be happy that he has paid tax on it only for the allowance to be abolished now. Are the Government likely to backdate it?

Thanks (1)
Replying to Catherine Newman:
avatar
By johnjenkins
16th Mar 2023 09:35

Depends if the retired surgeons etc. go on strike.

Thanks (2)