Chancellor Jeremy Hunt has presented the Spring Budget with the aim of reducing inflation, growing the economy and reducing the public debt. Read on to find out what changes in tax and spending were covered in the speech.
The economy and fiscal forecasts
- According to the Office for Budget Responsibility (OBR), the UK will not enter a technical recession this year, though the economy is predicted to shrink by 0.2%.
- The OBR has predicted the economy will grow 1.8% in 2024, 2.5% in 2025, 2.1% in 2026 and 1.9% in 2027.
- The OBR has also predicted that inflation will fall from 10.7% last year to 2.9% by the end of 2023.
- Borrowings are predicted to be 3% lower in five years compared to the Autumn Statement amount of 7.1% of GDP.
- Underlying debt forecast to be 92% of GDP this year, rising to 93.7% in 2024.
- Unemployment is expected to rise by 1%, though 170,000 fewer people are out of work compared to the Autumn forecast.
Taxes and duties
- The increase in Corporation Tax will go ahead, with an increase from 19% to 25% for companies with profits over £250,000.
- The Annual Investment Allowance (AIA) will stay at £1 million.
- The super-deduction scheme (which allowed companies to write off 130% of investments against profits) to be replaced with full capital expensing allowed from taxable profit for IT equipment, and plant and machinery for the next three years.
- The Lifetime Allowance charge on pensions will be removed from April 2023 before the Lifetime Allowance, currently set at £1.07 million, is abolished entirely from April 2024.
- The Annual Allowance that can be saved to your pension will be raised from £40,000 to £60,000.
- Alcohol duty will go up in line with inflation, though there will be an alcohol duty freeze for pubs on draft products. This freeze will not apply to draft beer sold in supermarkets.
- The 5p fuel duty cut will be continued for another 12 months with an overall freeze to continue on fuel duty.
Cost of living support
- The energy cap of £2,500 for the average household will be extended to the end of June 2024.
- Customers on prepayment meters will no longer be charged more for their energy.
- There will be an increase in childcare support by providing 30 hours a week of free childcare for 38 weeks a year, for eligible working parents (both parents work at least 16 hours per week) of children aged nine months to three years. This will be rolled out in phases from April 2024 and is in addition to the 30 hours a week already provided for eligible working parents of three- to four-year-olds.
- There will be additional funding for nurseries that provide free childcare.
- Schools to provide wraparound care, commencing in September 2024.
- For those that receive support for childcare costs in Universal Credit, this payment will be made available upfront and the maximum potential benefit for parents will be increased.
Public sectors and government spending
- Defense spending to increase to 2.25% of GDP with £11 billion spent over the next five years.
- Targeted tax relief for firms that take part in the government's 12 new investment zones to increase research, development and growth in hi-tech industries.
- Nuclear power to be classified as ”environmentally sustainable” and receive the same incentives as renewable energy.
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