Insights

Jeremy Hunt is due to deliver his Spring Budget on 15 March 2023 and there has been a lot of speculation about what is going to be announced. One thing we can be sure of is that tax cuts aren’t likely to be on the agenda. Instead, we are more likely to see further increases - perhaps not in the form of obvious headline increases but more ‘stealth measures’, like the freezing of allowances and removal of tax relief opportunities.

The Chancellor’s strategy for the economy is to reduce borrowing costs and inflation by carefully increasing taxes and managing inflation. At the same time, he wants to try and encourage investment, both locally and from overseas, to try and boost the country’s flagging economic growth. If any tax cuts are announced, they are unlikely to take effect for some time, simply because the government cannot afford to do otherwise.

Whatever measures are introduced the Chancellor needs to proceed with caution. The different fiscal policies announced over the past 12 months, which including the disastrous ones unveiled by Kwasi Kwarteng together with the impact of Brexit, have had a rather negative impact on the UK economy. The International Monetary Fund (IMF) is expecting the UK’s economy to perform the worst across all other G7 nations in 2023.

Here’s our list of ten potential policy announcements that could be made when spring Budget 2023 day comes around in March.

1. Basic rate of income tax remains unchanged at 20%. A drop to 19% for the basic rate was previously announced to become effective from 2024 but this may not now happen;
2. Fuel duty may be frozen for the foreseeable future to help mitigate cost of living increases. It was due to increase by 12p a litre, but this policy may be scrapped;
3. State pension age may be increased to 68 by 2025/2026. It was due to increase to 68 by 2044 and 2046 but the government urgently needs additional income and reduced expenditure;
4. Corporation tax will increase to 25% from 1 April 2023 for all companies with profits over £50,000. Due to the negative impact this could have on international enterprise, the government may decide to unveil a long-term rate reduction policy, to begin in the future with the aim of controlling the departure of multinational businesses;
5. The capital allowances super deduction is due to finish in April 2023 and R&D tax credits for SMEs are being restricted too. A new tax relief policy and replacement to incentivise business investment may be unveiled, potentially linked to the corporation tax changes;
6. The government has consulted on possible options for ‘corporate re-domiciliation’, whereby a company’s place of incorporation can be changed to the UK without this affecting its legal status. A policy related to this could be announced, with the aim of encouraging incoming business investment into the UK.
7. To further incentivise international start ups, especially given the increases to UK corporation tax, the government could duplicate a policy offered by some European countries to offer fixed period tax breaks to new international businesses; for instance giving a tax rebate to newcomers. This may be consulted on initially to establish its viability;
8. Recent news reports highlighted that the beneficial ownership register designed to identify the ultimate owners (and beneficiaries) of residential property in the UK has not been as effective as expected. Many owners have failed to file the appropriate returns or have found loopholes to enable them to remain unidentifiable, thus avoiding paying the relevant taxes. The Spring Budget could unveil a new HMRC programme to respond to these issues, by increasing investment in enforcement. This is likely be money well spent from their viewpoint because government data shows an £18:£1 return on investment into tax enquiries;
9. Inflation increases make saving more attractive for investors and it is possible that the Chancellor will introduce a lifetime limit to the amount of money that can be held in a savings ISA, similar to the limits now imposed on pension investments;
10. Non-UK domicile tax policy continues to be controversial and we may see an increase in the flat rate of tax that non domiciled residents of the UK are required to pay.

We will be monitoring the Spring Budget as it happens and will be sharing our updates and interpretations with you.

If you would like to discuss any aspect of tax planning with us, please get in touch via partners@rjp.co.uk