?? LIVE: UK Spring Budget 2023
Summary
Page editors: EY Tax and ITEM Club teams in the UK
Live updates for this announcement have come to an end and this page will no longer be updated.
____________________
5.19 p.m.
Watch the full debrief at 3pm GMT on Thursday
If you're looking for more in-depth analysis on today's Spring Statement then please join the webcast on Thursday. EY teams will help you understand how the economy, business community and take-home pay will be affected by the UK Chancellor’s announcements.
____________________
5:17 p.m.
How can talent leaders meet the demand for quantum skills in a rapidly emerging marketplace?
The Chancellor has announced a ￡2.5 billion research and innovation programme to turn UK into a ‘world-leading quantum-enabled economy’.
A recent EY survey has found that 55% of UK executives believe the biggest skills challenge is not just finding people to develop the technology, but finding business leaders who know how to take advantage of it.
What is quantum computing?
Quantum computing harnesses the peculiar behavior of atomic and subatomic particles to execute certain types of algorithms faster and more efficiently than the most powerful supercomputers available today. Such acceleration could offer solutions to previously intractable problems, with significant impacts on individual businesses, as well as on entire sectors and economies.
Here are five steps your business can take now to ready a quantum workforce:
____________________
5:15 p.m.
Delivering certainty for the creative industries
Chris Sanger, EY UK&I Tax Policy Leader
Today’s reform of the creative industries tax reliefs into expenditure credits will bring welcome certainty to a sector that has responded well to the aspirations of previous Chancellors. The creative sector tax reliefs have traditionally been the poster child for effective tax incentives, with each ￡100 of tax relief in 2019 generating a return on investment of ￡644 in gross value add.
With the imminent arrival of the 15% Global Minimum Tax, applying from the start of next year, the effect of these credits could have been undermined. The Chancellor’s actions today, in converting them to expenditure credits, should ensure that the new incentives carry on the good work of the existing reliefs.?
?We also saw other changes, with the extension of the additional relief for theatres, orchestras, museums and galleries, as well as the re-focus of the relief back onto UK costs, denying relief for costs previously allowed in the European Economic Area.
____________________
5:10 p.m.
Can tech-hubs halt decline?
Regions heavy in consumer-facing businesses forecast to be most negatively impacted by economic decline.
Could Chancellors new investment in tech-hubs halt decline and bring growth sectors to areas like the East Midlands, and Yorkshire and Humberside?
____________________
5:03 p.m.
Sowing seeds for growth, but no green shoots for capital spending
Rohan Malik, EY UK&I Government and Infrastructure Leader
Today’s Spring Budget reinforced the Chancellor’s commitment to stability, with selected growth incentives for priority areas. This may help reassure some in the business community, with clear and consistent policy that was telegraphed in advance.?
While it is encouraging to see Government sow the seeds for future growth in specified areas, there were no ‘green shoots’ for capital spending, which the Chancellor reiterated in his plans to freeze from 2025. Inflationary pressures will mean this essentially represents a cut to public sector investment, which may risk the delivery of the UK’s already delayed largescale infrastructure project pipeline.?
EY’s recent Regional Economic Forecast revealed that the rising cost of living is likely to exacerbate the differences in economic performance across the country this year, widening regional inequalities. Infrastructure projects help deliver growth, jobs and skills across the UK, so pushing these projects even further behind schedule is likely to have consequences for regional growth. Private sector capital is available to plug gaps in public spending, but mobilising institutional investors will require further clarity. With various projects either stalled or encountering delays, government could help dispel confusion by outlining which are key national priorities and highlighting where the private sector can play a collaborative role in funding them.
Investment zones have the potential to nurture growth in areas that most need it, but central and local government will need to work together in the coming months to pair this policy with visionary region-by-region sectoral growth plans. A one-size fits all approach won’t work, and regions should understand their own strengths, weaknesses, and sub-sector opportunities. This will require close collaboration and defined roles within the private sector, alongside government, as investors, employers and economic agents in their regions. It’s also vital to unlock investment in skills and encourage labour retention.
____________________
4:23 p.m.
A bare bones Budget for tax
Chris Sanger, EY UK&I Tax Policy Leader
From a net tax cut perspective, the Chancellor was pretty restrained, spending no more than ￡14bn a year across 2023/24 to 2025/26. Of that amount, over 90% related to just two measures, being the full expensing for large investment and the fuel duty freeze. Beyond this, the remaining 28 new tax measures net just ￡1bn on average per annum in additional revenues.
Some businesses facing challenging times ahead may have hoped for a reprieve from the rise in the rate of corporation tax. While that hasn’t transpired, many businesses may welcome the chance to avoid having to learn yet more tax rules. While the Chancellor hasn’t saved the Office of Tax Simplification, perhaps he has taken on board its mission and sought to constrain the aspirations of his most enthusiastic officials.
____________________
4:08 p.m.
Chancellor hunts for growth by attracting individuals back to the workforce after parental leave
Tom Evennett, EY UK&I Private Client Services Leader
The other significant cost – as the Chancellor hunts for growth by attracting individuals back to the workforce after parental leave – was the extension of free childcare to working parents of children aged 9 months to three years old.
There were also changes around the removal of UK tax reliefs, which had previously been extended by EU law and which may affect individuals: charitable reliefs will only apply to UK charities from April 2023, while and EU/EEA charities will no longer qualify for UK charity reliefs; and from an inheritance tax perspective, only agricultural property and woodlands in the UK would potentially qualify for relief, whereas previously land in the EEA was also eligible.
____________________
4:05 p.m.
Personal taxes – A quiet day as the Chancellor hunts for growth
Tom Evennett, EY UK&I Private Client Services Leader
As anticipated, it was a quiet Budget for personal tax measures, with no changes to the already-announced tax rates and thresholds across income tax and capital gains allowances. There were a couple more freezes announced to thresholds for the 2023-24 tax year, including those to the starting rate for savings at ￡5,000 and the ISA allowances (￡20,000 for adults and ￡9,000 for Junior ISAs per year). There was also some help for hard-pressed families on energy in the form of maintaining the 5p reduction in fuel duty, no RPI increase in fuel duty, plus the extension of the Energy Price Guarantee at ￡2,500 until 30 June 2023. This latter move will cost the Chancellor nearly ￡8bn next year.
____________________
3:31 p.m.
Tax reliefs could stoke growth for manufacturing sector, but the devil will be in the detail
Mark Minihane, EY UK & Ireland Advanced Manufacturing & Mobility Tax Leader
The Chancellor’s focus on tax reliefs – and allowing full expensing for qualifying plant and machinery from 1 April 2023 until 31 March 2026 – is encouraging for the manufacturing sector.
领英推荐
An increased rate of relief for loss-making R&D-intensive SMEs should also have a positive impact on manufacturing research and development.
Given the importance of the advanced manufacturing sector to the UK’s regions, the announcement of support for 12 high-potential, knowledge-intensive growth clusters, known as ‘investment zones’, will also be welcome and could help to attract new opportunities for the UK’s manufacturing firms. These businesses will be keen to hear more about the enhanced rates of Capital Allowance, Structures and Buildings Allowance, and relief from Stamp Duty Land Tax, Business Rates and Employer National Insurance Contributions being offered.
However, a more thorough and long-term package of tax reliefs to support UK manufacturing is required to accelerate growth in the sector. Manufacturing businesses will look to future policy announcements expected from the Government, and the devil will be in the detail when assessing the impact of this announcement on the sector.
____________________
3:25 p.m.
Long-term sick continue to be highest driver of inactivity
A greater prevalence of long-term sickness has continued to be?the biggest driver of higher inactivity, a trend that began before?the COVID-19 pandemic, but which has picked up more quickly?since early 2020. There is a question mark over whether these?people will ever return to the labour force.
That said, more young people staying in education has also played an outsized role?in pushing up inactivity. That these individuals will eventually?enter the workforce (hopefully with improved skill levels) seems?more likely.?
____________________
3:19 p.m.
A super deduction, but not as we know it??
Chris Sanger, EY UK&I Tax Policy Leader
The star of the Chancellor’s “E for Enterprise” was the immediate capital expensing for those businesses spending over ￡1m per annum on investment on new plant and machinery, costing over ￡10bn in 2024/25. This maintains the targeting of the super deduction, so will not be available to those buying second-hand equipment. It also applies at a rate of 50% to long life assets and various other assets.?
Notwithstanding these constraints, giving ￡25 back for every ￡100 spent, is still expected to encourage greater investment, even if in reality it only represents a cashflow benefit. In practice, this represents a very slightly larger cash flow benefit than the super-deduction (which was ￡24.7 for every ￡100 spent), since it applies to a corporation tax rate of 25% not 19%.?
Whether this level of additional investment is achieved may depend on how confident business is that the Chancellor can make it a permanent measure. He vowed to do so if it can be afforded. Limiting the relief to just three years helps the Chancellor to balance his books and actually generates extra tax receipts in 2027/28 as the timing effect reverses, but it doesn’t help businesses with investments that have long lead times.?
____________________
3:10 p.m.
A “Budget for growth” should improve the economy’s prospects
Martin Beck, chief economic advisor to the EY ITEM Club
The net fiscal loosening announced in today’s Budget will likely improve the short and long-term economic outlook. However, the Chancellor’s decision to stick with April’s substantial rise in corporation tax and the ongoing freeze in income tax thresholds means fiscal headwinds have far from gone away. And with well-publicised issues in the US banking sector presenting a new source of uncertainty, some unexpected caution may need to be attached to the OBR’s less downbeat forecasts.?
Those forecasts paint a brighter near-term picture for the public finances, with forecast borrowing this year and next ￡33bn lower than only three months ago, despite the fiscal cost of Budget measures. The OBR has also reined back on its previous prediction of a prolonged downturn, with the economy now expected to avoid recession. A lower trajectory for energy prices has helped on both fronts and given the Chancellor leeway to maintain the energy price guarantee at its current level. This will reduce inflation over the next few months and avoid what would have been another headwind to consumers.
Supply-side measures around boosting investment and encouraging more people into the workforce should be positive for growth. That said, allowing businesses to fully expense investment against taxable profits may only mitigate the impact of other incoming changes – April’s rise in corporation tax and the end of the super-deduction tax break. The new investment incentive is time limited, while the corporate tax rise is permanent. And the overall tax burden is still headed for a 70-year high, aided by the continued cash freeze in income tax thresholds.???
The OBR thinks the Budget’s measures will boost the economy’s potential, although a steep fall in energy futures prices and higher migration also contribute towards a more optimistic long-term outlook. As a result, the Chancellor is expected to continue meeting his fiscal rules, although the debt goal only marginally.?
____________________
2:35 p.m.
A help yourself business Budget
Chris Sanger, EY UK&I Tax Policy Leader
This is an incentives-based, help-yourself Budget, where business is asked to do as the Chancellor directs to get the reliefs on offer. Whether you’re a big business investing and getting full expensing, a small business spending 40% of more on R&D or a company investing in a designated zone, you’ll benefit from the Chancellor’s announcements today. Otherwise, businesses are left with a Corporation Tax rate that increases to 25 per cent from April.
The largest of these new measures is the immediate capital expensing, costing over ￡10bn in 2024/25. The Chancellor has delivered this for three years and vowed to extend when it can be afforded. This measure t helps the Chancellor to balance his books and actually generates extra tax receipts in 2027/28 as the timing effect reverses, but uncertainty over the longevity may limit the effectiveness.
These large projects take time to become 'shovel ready’, not least due to planning and other requirements. The sooner the Chancellor can achieve his aspiration and reassure businesses that this incentive will cover projects with long lead times, the greater the investment the UK is likely to attract.
____________________
2:22 p.m.
Pensions Lifetime allowance: while increase will benefit high earners, it will have no impact for the majority of the UK population
Russell Laver, Pensions Partner at EY
The ￡20,000 increase in the annual pension allowance to ￡60,000 represents a welcome reversal after years of reductions and should encourage a greater number of people to put more into their pension pot. However, while the increase will benefit high earners, it will have no impact for the majority of the UK population.
The abolishment of the standard Lifetime Allowance (LTA), which previously stood at around ￡1m per individual, will also be welcomed by high earners who still have many years to build up retirement savings. Although it will be less beneficial for those high earners who have opted out of pensions due to previous protections and who only have a few years to retirement, as they would likely end up breaching the Annual Allowance, and will not benefit lower earners.?
These are wholesale and complex changes, and savers who can benefit should consider taking professional advice to ensure they are planning effectively for their retirement.
____________________
1:50 p.m.
An incentives-based budget
Chris Sanger, EY UK&I Tax Policy Leader
This is an incentives-based Budget: do as the Chancellor directs to get the reliefs on offer. Whether by investing (full expensing), R&D (spend more than 40% on R&D), and coming to investment zones.?Others are left with a Corporation Tax rate raised to 25% as planned.
The measures for businesses were as promised - few, but targeted on areas where the Chancellor wants business to change.?Immediate expensing for three years will be helpful, but these projects take time to become 'shovel ready' and hence the aspiration to make this permanent will be critical to its effectiveness.
____________________
12:40 p.m.
Take home pay
Unless the Chancellor makes additional announcements for income tax/NICs today, here's what your take home pay could look like from 6 April.
____________________
12:33 p.m.
Chancellor to takes to the floor of the Commons
Jeremy Hunt, Chancellor of the Exchequer, has taken to the floor to deliver the Spring Statement 2023. Reaction and comment from EY teams coming soon.
____________________
10:55 a.m.
What could be on the cards for today's statement?
____________________
10:00 a.m.
Chancellor to take floor around 12:30 p.m. today
Follow the live updates here today for help deciphering the Chancellor’s announcements and the impact they’ll have on the economy, business community and take-home pay.
Professional Financial Services
1 年@