With a remit of boosting economic growth the Chancellor, Jeremy Hunt, has delivered the UK Budget. Peter Webb, our Head of Tax Advisory takes a look at the main announcements.
In the face of enormous economic challenges Jeremy Hunt, the UK Chancellor, delivered his Spring Budget, which he termed a budget for growth. Ahead of setting out his key announcements, Mr Hunt shared the news that the Office of Budget Responsibility (OBR) had confirmed that no technical recession will affect the UK in 2023, although in reality there will be a 0.2% retraction in the economy this year; a healthier position than the predicted 1.4% initially reported.
The view, reiterated a number of times, was that the plan put in place during the autumn is working. Mr Hunt appears to have been able to steady the ship. And the outlook certainly looks more favourable than first expected with confirmation from the OBR that debt is reducing, along with clear predictions that the UK economy will grow by 1.8% in 2024.
The root of the announcements made it quite clear that Mr Hunt has very little to give away. So aside from a handful of cost-of-living measures such as extending the energy price guarantee, freezing fuel duty and cutting draft duty on alcohol, the focus is on building a dynamic economy which may be able offer up tax cuts in the months ahead – in every likelihood as part of the Government’s pre-election push.
There were a few key announcements, although many had been shared ahead of the speech. One of the most important ‘jack-in-the-box’ moments concerned pensions.
In a significant move on pension rules, the tax-free allowance which applies to pensions will rise from £40,000 each year to £60,000. The lifetime allowance, which had capped the total amount a pension pot could reach without being taxed to £1.07 million, has been abolished – a major step for many of those building sizeable retirement funds.
A changing workforce model
The opportunities afforded by Brexit were much touted, with the view that the UK now has the chance to build a workforce defined by high wages and high skillsets. In what was dubbed the biggest positive supply side intervention in the developed world, Mr Hunt revealed a number of schemes to encourage particular groups into work, including a ‘returnership’ programme to persuade those over 50 who are not working to come back to the job market. Specific funding was also announced to provide free childcare for all working families with children aged nine months or over, which will be phased in from next April.
Promoting economic growth was the cornerstone of this Budget. A range of regeneration projects were unveiled, along with a package of support for businesses to encourage investment into the UK. Reform to the approval processes relating to medicines, and the medical tech sector, were also touched upon, along with new rules concerning artificial intelligence to help champion this industry.
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The headline grabbing moments in Jeremy Hunt’s Budget all related to the reforms to pensions. These announcements were almost as surprising as what was not said. Again, there were no increases to the low rates of Capital Gains Tax and the much-touted lifetime limit for savings in Individual Savings Accounts also didn’t materialise. Along with Inheritance Tax reforms these could be changes that the Chancellor comes back to in future Budget statements.
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