Spring Budget Statement 2023: Live Reaction
Initial reaction from our team of experts
Genevieve Morris, Head of Corporate Tax
Nothing on sugar tax and tackling the biggest drain on the NHS and biggest cause of health problems in the UK. With tobacco duty going up, smokers are an easy target.
Bad news for business with Corporation Tax rate certainly confirmed to increase to 25%. It would have been a headline grabber to reverse it to 20% – still an increase on the current 19% but would have felt like a tax cut!
The Chancellor’s ‘tax cut’ for businesses represents a timing difference only: it’s a headline grabber but with no real cost to the Government. It will only benefit the biggest of companies as most companies would have been covered by the Annual Investment Allowance anyway!
Disappointed not to see something on the reduction in the taper allowance linked to earnings which is still a major barrier for some to save into a pension.
The Government can’t get away from it – for most average families, they are still better off to have one parent stay at home rather than go to work. This is just tinkering with a far bigger problem in the UK. Employers will need to be far more flexible in offering flexible/part time working to enable some of these working parents, who will benefit from the 35 hours to fit their working week around that, as most people work more than 35 hours a week.
Nimesh Shah, CEO
The secret winners from Jeremy Hunt’s Budget are individuals earning over £300,000. Whilst all the pension headlines are around abolishing the lifetime allowance, hidden away in the detail of Jeremy Hunt’s Budget is an increase to the minimum tapered allowance to £10,000, up from £4,000 – this is the minimum level of tax relievable pension contributions. The £6,000 increase will be worth an additional £2,700 of tax relief to someone earning over £360,000. Quite perversely, a minority of very high earners will be some of the biggest winners from today’s Budget announcements.
Robert Pullen, Private Client Partner
The yo-yo game on pensions is incredibly unhelpful for savers. Either the Government do or do not want people to save for their retirement. Increasing the allowance or abolishing it altogether, after recently restricting it so far, just confirms to younger individuals they can’t plan with any certainty!
This is very much ‘the tinker budget’. No real substance, all froth. Where are the policies to break down work barriers for the middle earners – such as on commuting costs? Where are the policies to release some of the built-up fiscal drag by uplifting allowances and bands to make work pay? Where are the policies to remove some unfairness in single/joint working families around things like child benefit charges? Over an hour of not very much.
Simon Rothenberg, Audit, Assurance & Advisory Director
Tackling productivity losses is great but trying to address with just business investment and getting more into work is not an answer; individual productivity has fallen, not just collective. Technology has a huge role to play in improving this and we need to leverage it in the right way and make that an integral part of our economy going forward.
Lower business taxes: A ‘most pro business’ country needs the rules to stop changing. Why would you invest when they might be different rules next week? And different ones again the following week? His measures are welcomed – but if cutting taxes, why not just reduce the headline rate?
R&D: New R&D rules for companies who spend 40% of costs on R&D. Fine, but isn’t that an incentive to reduce heads in other areas to meet the threshold?
Silicon Valley Bank rescue: is now the moment that the high street banks are made to realise that it is vital that new start-ups and fast growth businesses are given the support they need from banks rather than the “computer says no” approach which they have at the moment. This is why Silicon Valley Bank grew so fast: they understood the needs of such business like no one else does and now these companies need a ‘home’ to go to.
Marc Levy, Audit, Assurance & Advisory Director
As a parent of two children on the autistic spectrum, I welcome greater support to get them into the workplace when they grow up but they need greater support in their education first. There was nothing announced in terms of education investment that will make this route any easier.
The Budget announcement has finished, and I am still waiting to hear any announcement that will truly benefit entrepreneurial businesses looking to grow, unless they are investing in specific areas or operating a swimming pool. I welcome a more diverse and inclusive workplace with greater opportunities for those out of work, but for most businesses I work with, this Budget merely confirmed that the rise in Corporation Tax rates to 25% from next month will not change.
Full capital expensing: Small businesses are still worse off than having the Super-Deduction and if they enjoy less than £50k of profits, they are unlikely to exceed the Annual Investment Allowance of £1m anyway.
Simon Sutcliffe, Customs Duty Partner
Good news for small and independent breweries which have suffered a record number of closures and insolvencies.
Freezing fuel duties once again and retaining the 5p cut is not only good for motorists but also for holding down transport costs in the commodity and food supply chain. Hence, trying to help hold down food inflation costs.
Tobacco duty going up – which fits with Public Health UK goals (although no mention of the harm of vaping and its nicotine content).
The announcement of 12 new investment zones is a bid of a ‘damp squib’ in many respects. Such zones remain in many respects ‘unproven’ and the funds which have been allocated to this idea – circa £80m per zone over five years – is basically ‘nothing’ from an overall Government spending perspective.
Robert Salter, Global Mobility Director
Income Tax and NIC: The claim that one can earn £1,000 per month without paying anything a penny in Income Tax or NICs is much too simplistic. People who have zero hours contracts or work on a seasonal basis, for example, will in many cases continue to be liable to employee NICs on their wages, despite earning under £12,000 per annum. This is because the regulations continue to charge NICs on a ‘per pay’ basis rather than on annual earnings.
The announcement that the Government is retaining the tax relief available for institutions such as museums, theatres, operas and art galleries for a further two years is welcome. While the cost of this relief is relatively low, cultural events are a keen factor in encouraging tourism into the UK and this is an area that the UK does need to support following the problems caused by Covid lockdowns.
Child benefit clawback: The fact that Jeremy Hunt has done nothing to address the well-known and unjust flaws in the UK tax – e.g., the child benefit clawback which applies where one partner in a family with children earns over £50,000 per annum – is extremely disappointing.
The child benefit clawback can result in a family with three children, for example, suffering an effective marginal tax rate on their income between £50k – £60k of 68%. For those people with larger families the tax rate can actually even, in extreme cases, be over 100%.
Given that the UK economy presently has approximately 1 million unfilled vacancies, the steps announced by the Chancellor to try and ‘attack’ economic inactivity amongst the population are welcome. However, it is doubtful whether the steps which have been announced in this regard are sufficient to actually substantively cut this number of vacancies.
The removal of the lifetime pension lump sum limit (presently £1.073m) is welcome, as it will remove the punitive 55% tax charge that could be incurred by people who exceeded the lifetime allowance. While the absolute number of people caught by the lifetime allowance was relatively small, such individuals were often possessing vital skills (e.g., GPs and NHS surgeons). While the change will not, I fear, encourage existing early retirees to return to work, it will hopefully encourage those GPs, surgeons and the like who were approaching the lifetime allowance to continue in employment over the coming years.
Sean Randall, Stamp Duty Partner
Contrary to speculation, the Chancellor did not increase the stamp duty “additional” dwelling surcharge or reform the rules for mixed-use or multiple dwelling transactions. This reprieve might be short-lived. Believe it or not, the surcharge seems good value relative to other regimes and the government has proposed to reform the rules for mixed-use or multiple dwelling transactions “to make the system fairer and to reduce the scope for incorrect or abusive claims” – the only question is when this will happen? Reclaim firms will be rejoicing that the Chancellor has allowed them to continue making unsolicited offers to recent house buyers to reclaim over-paid stamp duty on highly speculative grounds.
Fiona Fernie, Private Client Partner
Fleeting reference to bringing forward measures against promoters of tax avoidance schemes but absolutely no detail. It will be interesting to see what that involves when the paperwork comes out.
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