Chancellor Jeremy Hunt has unveiled his first Budget in the House of Commons today, revealing the focus for the year will be on incentivising individuals who have left their jobs to return to the workforce, while boosting business investment. At the same time, Hunt revealed that the UK will not be facing a technical recession this year, and that we are ‘on the right track’ in terms of the economy.
Here’s what we know so far, and the confirmed measures that are part of the plan.
Taxation And Wages
Several new measures and changes have been announced relating to tax and wages. The current cap on the amount workers are able to accumulate in pensions savings over the course of a lifetime before needing to pay extra tax (currently £1.07m) is to be to be abolished.
The tax-free yearly allowance for pension pots, which has been frozen for nine years, is set to rise from £40,000 to £60,000. Conversely, fuel duty will be frozen, with the current 5p cut to fuel duty on petrol and diesel, which was due to end in April, being kept in place for another year. Meanwhile, alcohol taxes in pubs from August onwards are set to be 11p in the pound lower than the rate in supermarkets.
Energy
Several measures have been included concerning the energy sector, beginning with the announcement that government subsidies limiting typical household energy bills to £2,500 a year will be extended until the end of June. £200m is also being allocated to bringing energy charges for prepayment meters in line with prices for customers paying by direct debit. This affects around 4 million households.
The government has committed to investing £20bn in low-carbon energy projects over next two decades, with a focus on carbon capture and storage. At the same time, nuclear energy to be classed as environmentally sustainable for investment purposes. There is also the promise of more public funding.
Meanwhile, £63m has been allocated to help leisure centres meet the rising costs of heating swimming pools, as well as invest in ways to become more energy efficient.
Jobs And Work
A strong push can be seen to encourage a return to work for those who have retired, those currently receiving benefits, and those with disabilities that make work problematic.
Health-related benefits are to see the roll out of a new fitness-to-work testing regime to qualify. Meanwhile, requirements surrounding looking for work are set to become tougher, while lead child carers receiving universal credit are set to gain additional support. More places are also to be opened up on “skills boot camps” to encourage over-50s who are no longer working to return to the workplace.
Funding has been allocated for up to 50,000 places on Universal Support, a new voluntary employment scheme for disabled individuals to return to the workplace.
Economy And Public Finances
Some good news announced with the budget is that, according to the office for Budget Responsibility, the UK will not be plunged into a recession in 2023, as many have feared. The economy is predicted to shrink by 0.2% this year, although it is set to grow by 1.8% next year, 2.5% in 2025 and 2.1% in 2026.
Further good news is that the UK’s inflation rate is predicted to fall to 2.9% by the end of this year, a considerable relief compared to the 10.7% rate of the last quarter of 2022. Meanwhile, the underlying debt is forecast to be 92.4% of GDP next year. This is set to continue increasing until it reaches 93.7% in 2024-25.
Business And Trade
In the business sector the main rate of corporation tax for businesses earning taxable profits of at least £250,000 will increase from 19% to 25%. For companies with profits between £50,000 and £250,000 that rate will vary between 19% and 25%. Companies will be able to deduct investments made in new machinery and technology in order to lower their taxable profits.
Tax breaks and other benefits are to roll out for twelve new Investment Zones across the UK, with £80m allocated to funding them over the next five years. And international traders will be given longer to submit their customs forms under new, streamlined rules in an effort to reduce paperwork.
Other Measures
In addition to these points, some general measures are set to roll out this year, including a five year commitment to raise defence spending by £11bn; prison sentences for those convicted of marketing tax avoidance schemes; the allocation of an additional £20m in the next two years to go to suicide prevention charities; the promise of a streamlined approvals process for new medical products; and £900m dedicated to a new super computer facility for the UK’s AI industry
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The rules relating to pension transfers and inheritance tax could be set to change after HM Revenue & Customs (HMRC) announced that it is to review its guidance on the matter following a number of concerns raised by the Office of Tax Simplification (OTS) in a review published on July 5 2019.