2023 Spring Budget Preview
MARCH 2023 – OUR TAX PARTNER, IAN KELLY, LOOKS AHEAD TO NEXT WEDNESDAY’S BUDGET
The clock is ticking on Chancellor of the Exchequer Jeremy Hunt’s first formal Budget to be held on Wednesday 15 March.
After his Autumn Statement last November, we’re into confirmed traditional Spring Budget territory.
Hunt’s delivery back then, I wrote, was “measured and, to a degree, sombre”. Whilst his hands were tied to a degree by the rapid turnover of Chancellors last summertime, it did come across as akin to a newsreader’s autocue and it will be interesting to see if Hunt changes his style.
In a way he can’t win. After all, we all sigh when a Chancellor comes out with some rather lame or scripted jokes or humour.
Hunt had little to be pleased about in trying to invoke some damage limitation after the previous Johnson/Sunak; Truss/Kwarteng and Truss/Hunt outings and he duly addressed the then “black hole” with tax increases and spending cuts.
Since last November we’ve had reductions in energy costs rumoured not to be long lasting; a slight downward direction of the inflation rate; the first anniversary of the war in Ukraine; a winter of employee discontent with multiple strikes and, just this week, a potential solution to the Northern Ireland ‘Brexit’ problem.
There’s not much to gloat about, therefore, and at first sight not much room to manoeuvre for Hunt who had a mixture of allowances, rates and reliefs reductions and freezings to impart and not that long after Rishi Sunak and Kwasi Kwarteng had come up with tax cutting plans.
What can we possibly expect, therefore, from Hunt when he delivers his first Budget?
Having just increased the main rate of Corporation Tax to 25% from 1 April, it seems incongruous to be already talking about future cuts to that rate but it is on his agenda it seems.
It’s possible that he might announce some form of road map to achieve the reductions since it would seem there’s no likelihood of a one-off cut similar to the way the rate has increased.
Whether he lightens the gloom on this with some concessions on the Annual Investment Allowance and Research and Development we will wait and see but they would be easy wins.
Much has been said about the number of people post-Covid who have taken early retirement or have made the decision not to re-enter employment despite a buoyant jobs market. Some form of incentivisation, it could be argued, would be needed to turnaround this new trend.
The freezing of tax allowances, rates and thresholds to April 2028, thereby pulling more people into higher rates, and the increasingly controversial £50,000 Child Benefit earnings cap, are not going to be much in the way of an encouragement, but, like the possible phased reduction in Corporation Tax, might Hunt say something similar or will it be a “rabbit out of a hat” future moment?
Having already announced reductions effective from 6 April to the dividend allowance (£2,000 to £1,000) and the capital gains tax annual exemption £12,300 to £6,000 and then to £3,000 from 6 April 2024), might there be some further tweaks? Scrapping Business Asset Disposal Relief and increasing capital gains tax rates, which are generous when compared to income tax rates, would, again, be easy wins.
Pension higher rate tax relief keeps coming to the top of the pile as being ripe for abolition but, with the pension age increasing, is this can going to be kicked down the street again?
A reform of Inheritance Tax has been on the agenda of late and the freezing of bands and reliefs have shown no sign of being lifted and which have fallen some way below what the indexed figures would be. Might there be some streamlining of reliefs or an annual allowance introduced?
I’ve not even talked about the cost of funding the public sector pay rises ultimately going to have to be agreed, but Hunt is going to have to………..
Please look out for my Budget commentary on the 15th, and get in touch with any questions –