Spring Budget 2023: A Comprehensive Overview and Key Measures
Economic Growth and Inflation Expectations
The Spring Budget 2023 represents a well-rounded and growth-focused approach. With natural gas prices falling, experts anticipate that inflation will drop to below 3% by the end of the year. This decrease in inflation will help businesses avoid steep increases in payroll and borrowing costs and ease the squeeze on households facing a record decline in living standards.
Bank of England’s Base Rate and Impact on Homeowners and Businesses
The Bank of England’s base rate is projected to peak significantly lower than the 5% assumed in the Autumn Statement. This change is good news for homeowners and businesses, indicating a more stable financial environment.
Enterprise and Employment: Corporation Tax and Full Expensing Approach
The critical tax measures in the Budget Statement were unsurprisingly highlighted under the Chancellor’s focus on Enterprise and Employment. While there was no change to the decision to increase the primary Corporation Tax rate to 25%, the Chancellor announced a Full Expensing approach for qualifying plant and machinery. This change is a practical extension of the Super Deduction and aims to incentivise business investment. We recently published an article about full expensing here.
Support for SMEs and R&D Intensive Businesses
The Spring Budget also brought better news for SMEs, with increased R&D relief granted for R&D-intensive businesses. Although this improvement doesn’t reach the levels of relief previously available, it is a positive step forward.
Employment and Pension Savings
In employment, the most significant surprise was the proposed abolition of the Lifetime Allowance charge, which removes the cap on the amount of pension savings someone can have. This major shift in government policy will result in a rethink for employees regarding their approach to pension savings.
The Four Es: Enterprise, Education, Employment, and Everywhere
The Chancellor structured his plans around the four Es, which he believes are critical in unlocking the UK’s national potential. The focus on addressing the participation gap in the economy is welcome, but measures like increased childcare support will take time to materialise and affect growth numbers.
Support for R&D and Investment in Fast-Growth Sectors
The budget also includes measures supporting R&D and investment in fast-growth sectors. However, it lacks a grand strategy for boosting productivity and overall economic resilience, similar to the US Inflation Reduction Act or the EU’s Green Deal Industrial Plan.
In summary, the Spring Budget 2023 brings relatively better news on the short-term economic outlook and includes several commendable measures. While it doesn’t represent a game-changing budget, it sets the stage for future growth and development.
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