Chancellor of the Exchequer Jeremy Hunt is predicting the UK will avoid recession in 2023, with inflation set to fall from 10.7% in 2022 to 2.9% by the end of 2023.
In his first budget today the chancellor unveiled a new ‘full expensing’ tax scheme, abolished the pensions lifetime allowance, and new ‘returnship’ apprenticeships for over-50s.
Hunt confirmed the rise in corporation tax rise from 19% to 25%. He confirmed just 10% of all companies will pay the full 25%, and only firms earning more than £250,000 will pay the full 5% tax on their profits from April. Hunt said that the 25% rate was still lower than France, Germany, Italy, and Japan.
There was, however, a surprise business tax announcement. For the next three years the government is introducing a ‘full expensing’ scheme. That means every £1 invested can immediately be deduct from taxable profits. Hunt explained: “Every single pound a company invests in IT equipment, plant or machinery can be deduced in full and immediately from taxable profits – a cut worth £9bn.” This replaces the “super deduction” previously in place.
Hunt also unveiled cuts for small and medium companies investing more than 40% of their total expenditure in research and development – that will be worth £27 for every £100 spent.
The annual investment allowance for smaller businesses has been increased to £1m. That will mean 99% of all businesses can deduct the full value of all their investment from that year’s taxable profits.
When it comes to pensions the chancellor increased the pensions annual tax-free allowance from £40,000 to £60,000. He also abolished totally the pensions lifetime allowance that was previously set at £1m (£1,073,000).
The government is planning to provide 30 hours of free weekly childcare for children below the age of three where both parents are working. The government will also pay childcare costs upfront for parents on Universal Credit who want to increase their work hours – the maximum they can claim is £951 for one child and £1,630 for two children per month.
The chancellor unveiled a series of measures to lure over-50s back into work too. A new apprenticeship scheme will target at this group, called “returnships”.
The government was elected on a levelling up agenda, and as part of this the Chancellor announced 12 new investment zones (IZs). That is 12 potential Canary Wharfs, said Hunt. These are West Midlands, Greater Manchester, the North-East, South Yorkshire, West Yorkshire, East Midlands, Teesside, and Liverpool. There will also be at least one in each of Scotland, Wales, and Northern Ireland. If chosen areas will have access to £80m of support.
Other measures included:
The Energy Price Guarantee will remain at £2,500 for next three months.
Duty on a pint has been ‘frozen’. From 1 August duty on draught products in pubs will be 11p lower than supermarkets. Hunt added: “British ale may be warm, but the duty on a pint is frozen.” It is all part of the new Brexit pubs guarantee.
Fuel duty will be frozen and the 5p cut maintained for another 12 months.
Creation of a £63m fund to keep public leisure centres and pools afloat.
Nuclear power to be classed as “environmentally sustainable” in green taxonomy.
The 45% and 50% tax reliefs have been extended for theatres, orchestras, and museums.