In a departure from the recent norm, this Budget was delivered with an objective to not spook the markets and cause economic chaos. Although unusual, I quite liked that.
I always think the Budget is over-egged by us Accountants – it’s apparently the most interesting thing that happens to us in the course of a year. But there’s not normally much I get excited about. I like to focus on the important matters, and for me, that is some good news that I read with regard to the economy in general. Inflation is predicted to reduce to around 4% by the end of the year, which is not a surprise as the starting point for the statistic are prices already inflated by two years of very high inflation. It had to come down. But also that interest rate predictions have calmed from 6.5% to 4.5%. These two factors are very good news for all of us, in terms of our day to day lives.
The big budget news is additional childcare support. The UK has one of the highest childcare costs in the world and this is clearly a big barrier to work, and availability of labour is a significant factor dampening down growth prospects, so this is very welcome. Elsby will publish a Help Sheet about Childcare in the very near future, explaining the current system, and the changes.
Controversially, the Chancellor also announced two significant measures on pensions (from 6/4/23):
– the removal of the lifetime allowance (£1.07m) which implemented a significant tax charge on pensions above that amount, so this change gives much more flexibility for pension investment. This can be very tax efficient and also can be used to protect wealth from IHT.
– and the increase in the allowable annual pension contribution from £40,000 to £60,000 which is also helpful for tax planning.
Labour have denounced the move as a break for the ‘wealthy few’ – which I can’t deny – and have pledged to reverse the move if they win election. Although these changes are ‘good for business’ (for an accountant), I’m frankly astonished at the poor prioritisation, and it just reinforces the view that politics is a shady power game. One of Elsby’s core values is ‘to do the right thing’ and this is the exact opposite, in my view. However, please talk to us if you wish to re-evaluate your pension tax strategy and we will do the right thing for you 😊
There are some changes to R&D:
- Reduction in relief rate from 230% to 186% for SME’s
- RDEC credit (non SME) to increase from 13% to 20%
- Changes where there is a loss position
- New claimants need to inform HMRC of intention to claim within 6 months of the end of the accounting period
Other important changes have already been announced:
- Corporation rates will go up to 25% for businesses with profits above £250k, tapered down to 19% for businesses with profits below £50k.
- Super deduction on asset purchases ends on 31/3/23
- CGT annual exemptions reducing
- Personal Allowances being held
- VAT registration threshold frozen at £83k which is a real disappointment given high inflation – this is a real burden for some small businesses.
- Improvements to the Seed EIS scheme
I think that sums up the main points that will affect our clients. As ever, we’re all happy to discuss any of these changes with you. Here’s to a successful 2023!
You can read our full Spring Budget 2023 Summary here