In today's Budget there were no real surprises from what we predicted a week ago:
Economy
According to the Office for Budget Responsibility, the UK is expected to steer clear of a recession in 2023. Although the economy is predicted to experience a contraction of 0.2% this year, it is projected to rebound with growth of 1.8% next year, followed by 2.5% in 2025 and 2.1% in 2026.
The inflation rate in the UK is expected to decline to 2.9% by the end of this year, indicating a significant drop from the 10.7% recorded in the last quarter of 2022. The underlying debt, on the other hand, is anticipated to be 92.4% of the GDP in the coming year, increasing to 93.7% in 2024-25.
Taxes
The government has announced several changes to pension savings and fuel duty in the latest budget. The cap on the amount of pension savings a worker can accumulate over their lifetime before paying extra tax, which is currently set at £1.07 million, will be abolished. Additionally, the tax-free yearly allowance for pension pots will increase from £40,000 to £60,000, marking the first increase in nine years. This should higher earners and doctors caught in the pensions tax trap.
In other news, the fuel duty will be frozen, with the 5p cut to fuel duty on petrol and diesel, originally set to expire in April, being extended for another year. Finally, alcohol taxes in pubs will be reduced by 11p in the pound compared to the rate in supermarkets, starting from August.
Energy
The government has decided to extend the subsidies that limit typical household energy bills to £2,500 a year for an additional three months, until the end of June. Additionally, a £200 million fund has been allocated to bring energy charges for prepayment meters in line with prices for customers paying by direct debit, which will have an impact on approximately 4 million households.
The government has also pledged to invest £20 billion over the next two decades on low-carbon energy projects, with a particular emphasis on carbon capture and storage. For investment purposes, nuclear energy will now be classified as environmentally sustainable, and there is a promise of more public funding. Finally, the government has set aside £63 million to assist leisure centres with rising swimming pool heating costs and to promote energy efficiency.
Employment
A revised fitness-to-work testing system has been implemented in order to determine eligibility for health-related benefits. Additionally, a voluntary employment program for disabled individuals known as Universal Support has received funding for up to 50,000 spots.
Lead child carers receiving universal credit will also face more stringent job search requirements, as well as increased job assistance. Furthermore, there will be a greater number of "skills boot camps" available to encourage those over the age of 50 who have left their jobs to return to the workforce.
Business and Enterprise
The government has retained the previous announcement of a significant increase in the corporation tax rate paid by businesses on their taxable profits over £250,000. The current rate of 19% is set to rise to 25%, while companies earning between £50,000 and £250,000 will pay a tax rate ranging from 19% to 25%. However, companies can still reduce their taxable profits by deducting any investment made in new machinery and technology.
To encourage investment in certain regions across the UK, the government has also offered tax breaks and other benefits to businesses located in 12 new Investment Zones. Each zone will receive £80 million over the next five years to support economic growth and development.
International traders will benefit from streamlined customs rules that reduce paperwork and provide longer submission times for customs forms. These changes will make it easier and more efficient for businesses to operate internationally.
Other announcements
The government has also pledged to increase defence expenditure by £11 billion in the upcoming five years.
Criminal sanctions will be imposed on those promoting tax evasion strategies.
An additional £20 million funding will be provided to charities that assist in preventing suicides over the next two years.
Simplified authorisation procedure guaranteed for novel medicinal products.
£900 million has been allotted for the establishment of a new supercomputer facility to support the UK's AI sector.
Tax Calculators and Tax Tools
If you are eager to see how any of these announcements affect your income, please use our tax calculators and tools as they are all updated for the new tax rates, tax allowances and tax bands coming into force from April 2023.