Budget 2023 Special

Back in the Autumn, the new government through it’s chancellor, Jerey Hunt delivered a statement to build growth, tackle inflation and revisit the cost of living.This was put in place to manage the escalating issues occurring in the UK so it was very interesting to see the impact and the governments position and further response to the situation in the form of the Spring Budget delivered this week on the 15th.

Unsurprisingly, given the previous statements and decisions already made for the 2023/24 tax year, there was comparatively little in it for the payroll industry, however, there were a number of other areas and easements requiring review as well as clarification on some earlier announcements.

In this newsletter, we, therefore, review the key items and forecasts from the speech.

The chancellor set out the principles of his speech based on the original plans put in place by Rishi Sunak and his government which was to:

• Cut, and if possible, half inflation throughout the UK
• Reduce the level of debt
• Extend and grow the UK economy

Jeremy Hunt confirmed areas that have created more difficulties over the last 12 months including inflation and the effect on the cost of living as well as the current war in Ukraine and challenges around employment and the labour market, and built his budget around key areas:

Everywhere, Enterprise, Employment, and Education

A key announcement, therefore, was the forecast that inflation would fall to 2.9% by the end of 2023, 2022 finishing at over 10% which is far more positive than previous expectations and also shows the UK’s position and changes that have been made have to a degree been working. The government is still committed to the plan or reducing inflation to 2%.

The main announcements from the budget were:

Energy

It was announced the current energy cap of ￡2500 will be extended past its original deadline of the end of March for a further 3 months when it is expected that energy prices should start to fall. Due to the reduction in wholesale prices of gas and energy, we do expect the prices to start reducing from July.

There has been continued media and coverage about the increased and higher pricing for those on pre-payment energy solutions in domestic households, therefore, the chancellor announced pre-payment meter charges will be brought in line with direct debit payers, removing the premium currently paid but in some cases the poorest households.

Further Support and Announcements

• A further ￡63m funding to support leisure centres and swimming pools
• ￡100m to support local charities and community groups
• A further alcohol duty freeze until August
• Draught relief making the price of draught drinks up to 11p less than supermarkets from August
• Confirmation that the current 5p reduction and fuel price freeze would remain for a further 12 months
• A further freeze on gaming duty and increases to tobacco over inflation
• A further ￡5bn over two years on defence
• ￡30m to veteran’s support
• Further devolved funding to UK devolved governments
• Investment Zones – the previous announced Investment Zones were confirmed, and the government are looking at creating twelve:
• The locations und er review are West Midlands, Greater Manchester, the North-East, South Yorkshire, West Yorkshire, East Midlands, Teesside and Liverpool. There will also be at least one in each of Scotland, Wales and Northern Ireland
• Applications will be required to attain access to ￡80 million of support for a range of interventions including skills, infrastructure, tax reliefs and business rates retention
• It is also expected there will be Employers NI relief up to ￡25,000 for new starters in these locations and more information will be made available after decisions are made so currently no commencement date for the relief is known
• Corporation tax will increase to 25% for companies with profits greater than ￡250,000
• Full expensing for the next three years, with an intention to make it permanent:
• That means that every single pound a company invests in IT equipment, plant or machinery can be deducted in full and immediately from taxable profits
• A voluntary employment scheme for disabled people where the government will spend up to ￡4,000 per person to help them find appropriate jobs and put in place the support they need. It will fund 50,000 places every single year
• An introduction of a new kind of apprenticeship targeted at the over 50s who want to return to work. They will be called Returnerships, and these will operate alongside skills boot camps and sector-based work academies.

Childcare

• Those on Universal Credit returning to work will receive childcare costs up-front:
• The government will increase the maximum they can claim to ￡951 for one child, and ￡1,630 for two children, an increase of almost 50%
• Eligible households where all adults are working at least 16 hours, will receive 30 hours of free childcare not just for 3-and-4-year-olds, but for every child over the age of 9 months
• The 30 hours offer will now start from the moment maternity or paternity leave ends – rolled out in stages from 2024:
• 15 hours of free childcare for working parents of two-year-olds coming into effect from April 2024
• 15 hours of free childcare for working parents of nine months to three years old, from September 2024
• from September 2025, all eligible working parents of children aged nine months up to three years of age will be able to access 30 free hours per week.

Payroll Changes

Payroll of Benefits is being more and more the normal process. This year, HMRC has already confirmed the end to voluntary payrolling with a requirements for employers now all having to register payrolled benefits in all situations. Through the budget, they have now extending the Payrolling Registration Service for Benefits in Kind (PBIK) to Authorised Agents: This measure will allow authorised tax agents to register for the PBIK service on behalf of their clients.

Although previously frozen through budgets in 2021 and 2022, the chancellor in the March budget made significant changes to the allowances and thresholds for pension contributions and their status for tax relief.

With effect from the 6th of April:

• The Annual Allowance was increased from ￡40,000 per year to ￡60,000
• The Money Purchase Annual Allowance was increased from ￡4,000 per year to ￡10,000
• The Lifetime Allowance is abolished when previously it had been locked at ￡1,073,100
• The Annual High Earners Taper increases from ￡240,000 to ￡260,000

The measures will however also introduce a cap on the tax-free lump sum at 25% of ￡1,073,100 per year which equates to ￡268,275 and this ensures that the lump sum payments remains controlled.

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