Budget Statement 2023: A Back to Work Budget

Jeremy Hunt announced his second Budget as Chancellor. Nothing too surprising, with April 2023 being the “go live” date for many changes we already knew about.

Hunt started the Budget announcement that the UK will not enter a recession this year, but will see a reduction in debt and inflation, and grow the economy.

The Chancellor stated that the budget being delivered is designed to remove obstacles to stop business investing and recruiting, and set up the UK as a science and technology superpower. It is predicted that inflation will fall from 10.7% to 2.9% by the end of 2023.

Hedges-Quinn has put together this simple, no-jargon guide on the headlines that will impact you as a business owner. We will gloss over the groan-worthy jokes that the Chancellor scattered throughout his speech!

Employment

If you are struggling to fill vacancies, with unemployment at its lowest rate since 1974, the Budget may help you.

Figures state there are 1.1 million job vacancies. If you have been trying to recruit you will know that there just aren’t enough applicants per role. This “Back to Work” budget is focused on enticing the economically inactive back to the workforce, and moving part-time workers to full-time. There are 7 million economically inactive people in the UK so hopefully, these changes will encourage them back to work and help fill your vacancies.

• Over 50s – “Returnerships” will offer skills training tailored for those over 50, who took early retirement. This will bring a wealth of talent and ability back into the economy. Reforms are in place also to encourage people not to leave the workforce at 50.

• Reskilling – an increase in skills workshops to improve the availability of the workforce in construction and technology.

• Long-Term sick – the UK has the highest number of working-age people off long-term sick since records began 30 years ago. The 2,520,000 people not working due to long-term sick issues are across all ages. One scheme will be to encourage training for home-working jobs. There will also be reforms to the benefits system related to disability claims to allow claimants to seek work before losing benefits. A new scheme, Universal support, will help people get back to work.

• Parents – To encourage women, in particular, back to work after having children there was a series of reforms.

Families on universal credit will now receive childcare funding upfront, instead of having to claim it retrospectively. This will also increase from £646 a month per child to £951.

From September 2026, families, where all adults in the home are working a minimum of 16 hours a week, will be eligible for 30 free hours of childcare a week from the age of 9 months. This will be introduced in stages from April 2024, and be fully in place by September 2026.

Financial incentives for childminders to join the profession.

Change in ratio of carer to child in childcare settings.

All schools to provide wrap-around care, 8 am to 6 pm, from September 2026

• Health MOTs – the Government is to trial covering 80% of the costs of providing healthcare to employees in small and medium-sized firms. This will focus on mental and physical health, to keep people in work.

• Job Seekers on Universal Credit – sanctions applied more rigorously.

Pubs and Licenced Premises

Alcohol Duty Freeze remains in place until 1 August, as already stated.

From 1 August 2023, the duty on draught products will be up to 11pence lower than supermarkets.

Cars and Fuel

• Fuel Duty - has been frozen since 2011. A fact that receives considerable criticism from environmentalist organisations and does seem to contradict the ambition for the UK to be a carbon-neutral country from 2050, but remains in place.

• Fuel Price Cut – the 5p fuel price cut, was put in place in March 2022
• and will be maintained until March 2024.

Corporation Tax Increase

As already known, the main rate of corporation tax will increase from 19% to 25% from 1 April 2023.

Companies with profits of between £50,000 to £250,000 will get some relief.

Companies will profits of less than £50,000 will see no change and continue to pay 19%.

It is anticipated only 10% of companies will pay the full 25%

Investment ‘super-deduction’ tax break

The “super-deduction” tax incentive provided 25p off company bills for every pound of qualifying spend on plant and machinery, will end 31 March 2023. To replace, and ensure there continues to be an incentive for capital investment, this will be replaced with:

For the next three years, every £1 spent on IT equipment, plant, and machinery, can be immediately deducted from taxable profits.

Whilst initially in place for three years, it is hoped to make this permanent once practical.

R&D tax credits

Small and medium businesses will now be able to claim a credit worth £27 for every £100 they spend if they spend 40% or more of their total expenditure on R&D.

Twelve Investment Zones

The levelling-up policy was expanded on.

Hunt announced 12 new Investment Zones, which will each receive £80m in funding over five years, including tax reliefs. Described as twelve potential “Canary Wharfs”, applications for specific areas will need to be successful to obtain the funds.

Eight places in England have been shortlisted to host investment zones, including Greater Manchester, Liverpool and Tees Valley. A further four zones will sit across Scotland, Wales and Northern Ireland.

City Mayors

To encourage local entrepreneurship, local authorities will gain responsibility from 2024 and there will be an increase in financial devolution to allow City Mayors to decide local spending.

Rise in tax-free pension allowance

The amount employees can save into a pension before paying tax will increase to £60,000 from £40,000.

The lifetime allowance will be abolished.

This was particularly focused on senior health staff to discourage early retirement: this will stop over 80% of NHS Doctors to receive a tax charge.

Capital gains and dividends tax allowances

The dividend allowance will be cut from £2,000 to £1,000 next month and then to £500 from April 2024.

Capital Gains Tax will be cut from £12,300 to £6,000 in April 2023, and then to £3,000 in April 2024.

National Living Wage increase

As previously announced, the National Living Wage, to be paid to workers aged 23 and over, increases from £9.50 to £10.42.