Jeremy Hunt delivered his first Spring Statement yesterday as Chancellor. As part of his ‘Budget for Growth’, he announced a number of key changes to pensions and taxes to encourage people back into work so that the UK can continue to stay out of a ‘technical’ recession. Our key takeaways include:
“These are long and overdue reforms to make the UK pension system more attractive and simple. Higher-paid workers who might have felt forced into early retirement or reducing hours to avoid higher tax rates are now incentivised to continue working and contributing to the UK’s economy.
“In the small print, we can see that the Chancellor has updated the taper mechanism for the annual allowance. This taper was previously at £4,000 and restricted the amount that individuals could save into their pension without losing the tax relief on the contributions. A smart move to increase this allowance to £10,000 per year – the benefits will be felt far more widely.”
“A welcomed move from the Chancellor to maintain the 5p fuel duty cut and freeze duty again at current levels for 12 months. This move has ensured that the pump price will not increase by 14.4 pence per litre when VAT is added and should be welcomed by all during the current cost of living crisis. This freeze will also assist in helping the Government to meet its target of reducing inflation to 2.3% by the end of 2023.”
“The Chancellor has missed a huge opportunity to ease the pain for all businesses across the country – not just those in the new investment zones. By deciding to go ahead with the Corporation Tax rise from April 1st, the Chancellor has added an extra burden to British businesses at a time when they need all the help they can get.
“Full capital expensing is a very welcome measure to encourage investment, but we’ll need to see the small print to see how much this benefit, in reality, offsets the increase in Corporation Tax. At the least, it will bring a long overdue simplification of the current complex rules around capital allowances.”
“In a boost for the pub sector after three incredibly tough years, the Chancellor has announced a freeze in the duty rate applicable to draught beer from 1 August 2023. This will mean that the duty rate on draught products in pubs will be about 11p lower than the applicable rate for a draught product in a supermarket. Hopefully, the trade in all parts of the UK will pass this saving to the customer!”
“The back-to-work budget – but what about contractors? It’s disappointing not to see any adjustments to IR35 that are causing long-running problems for the huge contractor workforce. The Chancellor has overlooked this group and missed the opportunity to encourage growth across the UK’s modern workforce by removing the uncertainty of overly cautious categorisation imposed by artificial rules.
“Contractors often enjoy the freedom of running their own businesses and the protection that a limited company provides, but find themselves being treated as regular members of staff for tax purposes. The failure to address this in yesterday’s budget means we continue to see inequality for contractors who are being taxed as though they are an employee – but without the benefits and protections that a full-time employee gets.”
Other key changes include: