UK Budget 2023 - The Highlights
Chancellor Jeremy Hunt’s 2023 Budget is a “Budget for growth” that aims to boost the economy and tackle productivity issues. The UK has now been rated as the best place for business in the world by the World Bank, and we are also expected to avoid a technical recession this year.
During his Spring Budget 2023 speech, UK Finance Minister Jeremy Hunt announced a slew of tax and spending measures that will reshape the economic landscape for years to come. A plethora of measures was on the show, with the best known being the extension of some business tax reliefs and ongoing funding for the levelling up agenda.
The Chancellor's Budget also featured several new "investment zones" in up to 12 sectors of the economy. Up to PS80 million was awarded to support skills, business support and infrastructure. The sexiest of these was the investment zone of London, but this will likely be one of many such schemes to come.
A tidbit of interest is that the budget's main drawback was that it was too big for its own good. This led to a significant increase in borrowing by the Treasury, which will be met by a sizable tax cut for businesses and the like. Fortunately, a number of measures have been rolled out to mitigate the impact of this, including the introduction of the Enterprise Zones scheme. There are still some areas of uncertainty, however, as some sectors are still at risk of falling foul of government cuts. With that in mind, the upcoming fiscal year will be a busy one for all concerned.
Focus on Taxes
The UK Budget 2023 is a budget that is primarily focused on taxes. Chancellor Jeremy Hunt announced a range of new tax measures in the Budget that will have a direct impact on businesses and individuals alike.
The Spring Budget 2023, which was announced on Wednesday 15 March, is a "Budget for Growth" that was accompanied by a full financial statement from the Office for Budget Responsibility (OBR). The OBR now forecasts that the UK economy will not enter a technical recession in 2023.
With the economy now projected to avoid a recession, a raft of new tax measures were announced in the Budget that will help to boost the economy, including extending some business tax reliefs, ongoing funding for the levelling up agenda and targeted measures on childcare and pensions to encourage more people back into work.
There was also news on changes to tax-advantaged all-employee share schemes, which will be legislated in the Spring Finance Bill. This includes launching a call for evidence on the Share Incentive Plan and Save as You Earn (SAYE) tax-advantaged share schemes, which will be used to consider whether they should be simplified.
Similarly, the government is looking to improve the situation for companies undertaking intensive research and development, with changes to the Research and Development tax credit scheme announced in the Budget. Eligible companies will now be able to claim a higher rate of the R&D tax credit for eligible R&D expenditure that is worth 40% or more of the company's total qualifying expenditure.
This is in addition to existing provisions which allow businesses to claim a tax-free income for loss-making SMEs that undertake research and development. The government is planning to keep the option open to merge the current R&D tax credit scheme with the current SME incentive scheme, with draft legislation to be published for technical consultation alongside the Finance Bill in the summer.
The Spring Budget 2023 was a clear signal from the government that they are trying to make the UK a more competitive place for business. The headline announcement was on corporation tax, where the government confirmed that it is planning to raise the main rate to 25% from 1 April 2023. This means that many Northern Ireland-based businesses will face a significant disadvantage to their competitors in the Republic of Ireland, who will enjoy a lower corporation tax rate.
Boosting the Economy
Boosting the economy was a key focus of this Budget, with a strong emphasis on improving productivity and productive capacity. Rather than cutting taxes or slashing business investment, the Chancellor focused on tax reforms that will encourage more companies to invest in their UK operations.
A new PS9 billion three-year tax cut will allow businesses to fully deduct their spending on capital equipment and investments. The OBR expects this to boost business investment by 3% per year.
The Chancellor also launched 12 'Investment Zones' across the country, allowing firms to choose funding, support and tax breaks based on the sectors they are looking to invest in. These zones are designed to promote collaboration between businesses and universities.
Hunt also announced that the government will extend its energy price guarantee until June, extending the limit to PS2,500 from PS3,000. This will give households more time to save and should help the UK’s struggling families as they try to cope with rising energy costs.
In the longer term, the Chancellor has kept to his capital spending plans, with net investment still expected to be just over 2% of GDP by 2027/28, a major change from the previous policy, which suggested investment would be closer to 3%.
Despite all of these improvements, it is essential to continue to take steps to improve the UK’s growth prospects. This can be done by boosting demand for products and services and attracting more foreign investment.
This can be achieved by lowering the cost of living in the UK and providing more jobs. This is possible by reducing the cost of fuel, cutting business rates and making it easier for people to get mortgages and buy property.
Another important step to improve the economy is to increase public services. This can be done by increasing spending on health services, education and pensions.
This will also help to attract more foreign investment, which will also strengthen the economy in the long run. However, it is crucial to ensure that the spending increases do not come at the expense of essential public services or impact negatively people’s lives.
Investing in the Future
The UK Budget 2023 focused on the future, with measures to encourage new technologies. It also highlighted issues such as climate change, energy prices and cost-of-living pressures that need to be addressed.
Investing in the future is important as it will help to ensure that the country remains economically stable in the years to come. Chancellor Jeremy Hunt announced several measures that will help the economy grow and build a better future for the country.
One major announcement is the introduction of a tax deduction for 100% of capital expenditure on plant and machinery, from 1 April 2023. This is a welcome move that will incentivise businesses to invest in new projects and technology, which has the potential to increase the UK's economic growth.
Another key focus for the Chancellor was boosting the UK's artificial intelligence (AI) industry, with measures such as an "AI Sandbox" to encourage AI firms to get their products to market quickly. techUK welcomed these initiatives and hopes that the government will follow through with its plans to foster the AI industry.
Hunt also announced the creation of 12 investment zones that will be based in areas such as the West Midlands, Greater Manchester, the North-east, South Yorkshire, West Yorkshire, East Midlands, Teesside and Liverpool. These zones will be supported by the government with access to interventions worth PS80 million over five years.
In addition, the chancellor has also announced a number of other initiatives that will help boost the economy in the future. These include an extension to the British Patient Capital programme, which will provide at least PS3 billion in investment over 10 years and increase the focus on R&D-intensive industries.
These changes will help to increase the number of new jobs and improve the economy in the long term, ensuring the UK continues to thrive. The chancellor also announced that he would be appointing a new chief executive to take on the role of the National Digital Leader, who will be tasked with identifying and implementing the key digital initiatives that will drive growth in the UK.