We saw a confident delivery from the Chancellor Jeremy Hunt with Budget 2023.
‘A budget to build for the future’ – ‘The plan is working’ – ‘Drawing people back into the workplace!’
Forecasts show the UK will avoid recession, but noted the size of the economy will fall. Is this not indicating a recession or as it’s perhaps better than we expected, it’s not a recession! Minimal growth is expected in 2024 and 2025.
Inflation projected to fall below 3% by the end of the year? This seems a large reduction in 9 months. I must question whether this is actually achievable and has little to do with the current government. It should also be noted that 3% is still showing that prices are continuing to increase.
Fuel duty freeze to continue and last year’s 5p cut is to be retained. Let’s see how the prices change during 2023 with inflation expected to reduce… The scheduled rise would have been 12p.
The abolishment of the lifetime allowance on tax-free pension contributions was not expected though. This is currently £1.07m and it was widely reported to be increasing to £1.8m, but actually abolished altogether. This is together with a 50% increase in annual pension tax allowance from £40k to £60k (subject to high income tapering). In our current cost of living crisis, who can actually afford to pay the full pension allowance? Will this be viewed as a benefit for only the most wealthy?
As expected, corporation tax rates to increase from 19% to 25%. The 25% will be for company taxable profits of more than £250k. The annual investment allowance (currently £1m) is to be removed and from April, companies are able to deduct any investment in plant and machinery to reduce their taxable profits. (The 130% super deduction will be removed at the end of March as already announced). We do need to be careful on what is actually being classified as qualifying plant and machinery (normally this would exclude cars).
The Chancellors plan from the outset was to try and get more people back into work with incentives of 30 hours of free childcare for working parents increased to all under 5’s and apprenticeships for the over 50’s – ‘Returnships’ – Will this actually help mums return to the workplace and over 50’s back to work, or will the main incentives be high salaries, flexibility and working from home?
Don’t forgot the campaign to improve local transport – increasing funding over the next five years which includes £200m to help tackle our current pothole problem. I can’t be alone in thinking this will barely scratch the surface looking at the roads in and around the Braintree area…
Can we really get through 2023 without a decline and avoid recession? In our current position, I just can’t see inflation falling to below 3% by the end of the year with prices for food and energy constantly increasing.
I’m off to the pub, but only to drink draft beer, other alcohol duties are set to rise with inflation.
Posted by Graham McNeill
The views expressed in this article are the personal views of the Author and other professionals may express different views. They may not be the views of Lambert Chapman LLP. The material in the article cannot and should not be considered as exhaustive. Professional advice should be sought in connection with any of the issues contained in the article and the implementation of any actions.