After a tumultuous twelve months for the economy, what can we expect from the Chancellor Jeremy Hunt when he delivers the Spring Budget this week? Mark Tibbert, Westcotts‘ partner and head of tax, explains…
It’s not the time to rock the boat, as it were. If you’re labouring, no pun intended, under the apprehension that the Chancellor’s spring budget is going to be ‘all singing, all dancing’ then you’re likely to be disappointed.
There are absolutely no indications, at this stage, that Jeremy Hunt will want to do anything less than steady the ship, particularly after the last year of constant change.
This budget is likely to be prudent, sensible, and cautious in approach. Don’t expect any big announcements or surprises, particularly when it comes to business. This time around, it’s likely there will be more targeted support for individuals and households affected by the on-going cost-of-living crisis.
In November, the Chancellor’s aim was to calm the markets after the turbulent Liz Truss/Kwasi Kwarteng short-lived tenure in government, and I suspect that there will be ‘more of the same.’ You would be forgiven for thinking this one could be quite dull.
In the autumn, freezes on tax allowances was the order of the day and I don’t think we can expect any significant tax cuts on Wednesday. However, there is some speculation that the 5p cut per litre to fuel duty announced last spring and due to finish at the end of this month, might be extended for another year.
When it comes to the main rate of Corporation Tax, it will rise to 25% on 1 April – this plan to increase the rate is not expected to change course. What we may see is some increased incentives or increased tax reliefs for capital expenditure to encourage businesses’ investment to help stimulate the economy further. The Super Deduction, introduced in 2021, for companies to reduce their taxable profits by 130% of the cost was only ever meant to be a temporary measure, so it’s unlikely this will be extended beyond its expiration date.
While we normally have some speculation on Capital Gains Tax, I don’t think we will see any changes here, beyond the already announced planned reduction in capital gains allowance from £12,300 to £6,000 from 6 April 2023.
Again, there have been a whole raft of different announcements and U-turns when it comes to income tax and National Insurance contributions. The Chancellor said in November that the current basic rate of income tax would stay at 20% until economic conditions allow for it to be cut.
National Insurance rates were reduced from November last year, to reverse the increase that was brought in earlier in the year, and those levels remain in place from 6 April 2023, so no further changes expected there. Don’t expect anything radical when it comes to VAT either.
Tax cuts are only considered when the country is in a strong position, politically and economically, and we are certainly not out of the woods yet on either count. We might hear some more positive noises around tax cuts closer to the next General Election, perhaps in the autumn budget or even in a year from now – a little goodwill for the voting public.
There is some light at the end of the tunnel for the Chancellor with the better-than-expected public finances picture of recent weeks helping to quell public concerns about a long and painful recession.
Bringing down inflation and moving forward with caution and restraint will be the order of the day for Jeremy Hunt, while continuing to encourage investment and growth from British businesses. No real surprises, just ‘steady as she goes.’