10th March 2023
Chancellor Jeremy Hunt will give his Spring Budget statement on 15 March, alongside a forecast from the Office for Budget Responsibility (OBR). But will he think ‘outside the box’? We don’t have a crystal ball but here are some thoughts …
With the continuing economic challenges presented by COVID-19, the war in Ukraine and the cost-of-living crisis, Mr Hunt is under pressure to provide more help to both households and businesses.
But the Chancellor’s Autumn Statement contained tax measures that he said were needed to stabilise the public finances and bring down Government debt. So will there be anything new this time?
Potential changes that could be made in the Spring Budget
Energy Price Guarantee extension?
For households, many news reports say the Chancellor is expected to extend the Energy Price Guarantee at current levels for a further three months. Typical energy bills are currently scheduled to rise to £3,000 a year from April but calls have been made for the government to retain its current level of support with the cap at £2,500.
The argument is that as wholesale energy prices have fallen so the cost of the scheme to the government has reduced. All we know for sure at the time of writing is that Mr Hunt has said that the policy was “under review”.
An announcement was made by the government in January about the new Energy Bills Discount Scheme for businesses, which kicks in when the current scheme ends in March. However, while it will run until 31 March 2024, it will only provide discounts to eligible UK businesses on high energy bills.
Will there be a re-think on Corporation Tax anytime soon?
As the Chancellor is looking to find money to reduce public debt it seems unlikely that he will make any changes to Corporation Tax in the Budget. It is set to rise from 19% to 25% from 1 April, although the 19% rate will still apply if your business’s profits are £50,000 or less. Companies with annual profits of £250,000 or over will pay the full 25% rate, while between the two rates, a system of marginal relief applies.
You need to pay Corporation Tax on profits from doing business as:
- a limited company.
- any foreign company with a UK branch or office.
- a club, co-operative or other unincorporated association, eg a community group or sports club.
You don’t get a bill for Corporation Tax. There are specific things you must do to work out, pay and report your tax. More details are on the government website here.
Could the Chancellor consider a new idea on Corporation Tax?
The Institute of Directors (IoD) has suggested a plan for incentivising businesses to become more sustainable in return for a cut in Corporation Tax.
It is calling for the government to consider the idea that businesses which can demonstrate Net Zero should pay a lower rate of Corporation Tax. To reinforce its suggestion the IoD has recently published new data demonstrating that SMEs that currently have no plan to become Net Zero would be significantly more likely to do so if it would reduce their Corporation Tax bill.
We await the government’s reply on this.
Pensions Lifetime Allowance – will there be a new limit?
Jeremy Hunt could increase the Lifetime Allowance (LTA) for pensions in order to improve the conditions necessary to encourage the over-50s back into work.
This might help business owners who are struggling to recruit.
The Lifetime Allowance is the limit on how much you can save in your pension pot before being hit with a tax charge. This is currently £1.073m and is frozen until 2026.
Whatever happens in the Spring Budget, make the most of the tax reliefs and grants that are available to you and your business. If you would like to discuss this, please contact us.
