Spring Budget 2023
As the UK continues to weather the ‘cost of living crisis’, the chancellor – Jeremy Hunt – set out the government’s plan to help grow the economy.
Despite numerous rumours swirling ahead of the budget, Hunt’s announcement did not hold many surprises. We’ve compiled the most significant statements, along with insightful commentary, to provide you with a comprehensive overview of the budget’s key takeaways.
Taxes and wages
As expected, the chancellor announced the tax-free yearly allowance for pensions will rise from £40,000 to £60,000, an increase of 50%. The chancellor also announced he is abolishing the Life Time Allowance (LTA), which currently sits at £1.07m. This could be a potential boost for some higher earners affected by the tax.
Duncan Craze, Head of Financial Advice at Contractor Wealth, commented “The abolition of the Lifetime Allowance currently set at just over one million pounds, meaning that for those of us lucky enough to have this much saved into pensions, no additional tax will be due on monies drawn from a pension above this value.”
In addition, the fuel duty cut has been extended by another year and – from August – alcohol taxes in pubs will be 11p in the pound lower than the rate in supermarkets.
Business
Seen as an altered version of the ‘Super-deduction’ legislation, companies will have the opportunity to lower their taxable profits by deducting the cost of investment in new machinery and technology.
The Chancellor also announced the creation of 12 new Investment Zones, each receiving £80 million in funding over the next five years. These zones will offer tax breaks and other benefits to businesses investing in them, aimed at encouraging economic growth and job creation in regions including Liverpool, Teesside, and Manchester.
Legislation to tackle tax avoidance schemes
Jeremy Hunt briefly alluded to upcoming legislation aimed at tackling tax avoidance schemes. Speculations have arisen regarding the possible introduction of a Single Enforcement Body (SEB) to regulate umbrella companies.
The Chancellor’s hint at this during his budget speech seems to provide further confirmation of such plans. The introduction of a regulatory body would aim to increase transparency and reduce tax evasion, promoting fairness and responsible business practices.
An expert view
Following the latest budget, Russell Upton, Director of Key Accounts at Parasol, said: “The Chancellor’s brief mention to tax avoidance schemes – albeit fleeting – was heard loud and clear by those of us in the contracting space, leaving us on the edge of our seats awaiting further clarification.”
“HMRC went under the radar to share some updates to IR35 legislation last week, which focus on the definition of a ‘deemed employer’. While these latest updates are an attempt to simplify the rules, in my opinion, they still don’t go far enough.”
“Rumours had also been circulating that we may still see the introduction of a Single Enforcement Body to regulate umbrella companies in this year’s Spring Budget, and the Chancellor’s reference to this today seems to confirm suspicions.”
“The umbrella employment sector has little to no official regulation, meaning compliant companies are tarred with the same brush as those less compliant umbrella employers who have previously taken advantage of contractors.”
“More regulation is definitely needed within the sector to protect both umbrella employers and those contractors working through them. We are firmly in favour of increased regulation within our sector and await more information on what this might look like.”
With over 20 years of experience, Parasol is a trusted provider of compliant umbrella solutions. To find out how we can help you, please request a callback and one of our friendly experts will be in touch.
