On 15 March 2023, the Chancellor, Jeremy Hunt, delivered the Spring Budget in Parliament. Read this blog to learn more about the Budget’s key points and what they mean for you.
Income tax
Certain tax changes are set to come into effect from April 2024. Most notably, the Spring Budget confirms the changes to income tax previously announced in November’s Autumn Budget.
For those living in England and Wales, these changes mean that:
- the income tax personal allowance (ie the amount of income you can earn without paying income tax on it) remains frozen at £12,570 until 2028
- the threshold for the higher rate of income tax (ie the amount you have to earn before being taxed at 40%) remains frozen at £50,271 until 2028
- the threshold for the additional rate of income tax (ie amount you have to earn before being taxed at 45%) will be lowered from £150,000 to £125,0141
In practice, this means that tax burdens are increasing across the board. Due to the frozen tax thresholds, people will be pushed into higher tax brackets as their income rises (eg due to promotions or salary raises in line with inflation).
For more information, read Income tax. Note that Scotland has different income tax rates. For more information, read Income tax in Scotland.
Corporation tax
Corporation tax (ie tax paid on the profits of companies and other organisations, like unincorporated associations, operating in the UK) is set to rise from April. The tax rate is set to rise from 19% to 25% for companies with more than £250,000 in profit per year.
However, a new scheme will be introduced which allows businesses to fully deduct money invested in IT equipment, plant, or machinery from their taxable profits. This is designed to ease some of the burden placed on companies by the hike in corporation tax.
For more information, read Corporation tax.
Research and development credit
Certain small and medium-sized enterprises (SMEs) will be able to benefit from an enhanced research and development (R&D) tax credit. A 27% tax credit will be available for qualifying loss-making ‘R&D intensive’ SMEs. These are SMEs that spend 40% of their total expenditure on qualifying research and development (eg advances in science and technology).
This means that SMEs (including startups) that spend at least 40% of their outgoings on qualifying research and development projects will be able to recoup £27 for every £100 spent.
For more information, read Research and development tax relief.
Energy bill support
The Energy Price Guarantee (EPG) which capped typical household energy bills at £2,500 a year has been extended until the end of June 2023. This doesn’t mean that all households will pay less than £2,500, only that a household using a typical amount of energy will not pay more than £2,500 a year for gas and electricity. It is hoped that by the end of June, energy prices will have dropped sufficiently to make the EPG redundant.
Importantly, the Energy Bills Support Scheme (EBBS), which provided customers with a discount of £400 over the winter months, has not been extended. This means that households will not receive £66 or £67 contributions to their energy bills from April.
Note that businesses and other non-domestic customers may still be eligible for assistance with their energy bills under the new Energy Bills Discount Scheme (EBDS), which is set to run from April 2023 to April 2024. For more information, see the Government’s guidance.
Childcare costs
The Spring Budget is extending help with childcare costs in England only.
Currently, working parents are entitled to 30 hours of free childcare per week (during term time) for their 3 and 4-year-old children. This is being extended to cover children between the ages of 9 months and 2 years.
However, due to the logistics of rolling out this process (eg the availability of nursery places), this extended support will be made available in increments. From April 2024, working parents will be eligible for 15 hours of free childcare for their 2-year-old children. From September, the same will be true for children over the age of 9 months. Parents will be entitled to the full 30 hours for all children over the age of 9 months from September 2025.
Similar support will be made available in Wales and Scotland.
For more information, read Help with childcare costs.
‘Returnerships’
The Spring budget unveiled a new type of apprenticeship called a ‘returnership’, aimed at those over the age of 50. These returnerships are intended to boost the workforce, by enabling older people to return to work if they wish.
Returnership courses are expected to run alongside boot camps and sector-based work academies, to enable those over 50 to learn new skills in order to return to work.
More information on how exactly such returnerships will operate is expected in due course. For more information on apprenticeships in general, read Hiring an apprentice.
If you would like to learn more, read the Government’s update or the Spring Budget in full. If you have any questions, do not hesitate to Ask a lawyer.
- Budget 2023: What are the key points? - 16/03/2023
- The Online Safety Bill and what it means for you - 09/03/2023
- Changing filing requirements for small companies - 02/03/2023
