[UK] Budget 2023: business investment incentives and end to tax-free pension cap

Jeremy Hunt has laid out his Spring Budget and his intention of “proving the doubters wrong” by using a suddenly stronger economic performance to help fund new tax breaks for business investment and a drive to get people back into the workforce, The Guardian reports.

As he introduced £22bn of higher spending and tax breaks in the next financial year, the chancellor said the British economy would avoid a technical recession in 2023 with inflation falling by half. However, the economy is still expected to shrink this year.

In a move reportedly intended to keep older workers from retiring early, Mr Hunt announced a surprise decision to scrap the £1m cap on tax-free pension savings. He said, “No one should be pushed out of the workforce for tax reasons.”

Labour said the change would benefit only the 1 per cent with the biggest pension pots.

The chancellor announced a reboot of Britain’s faltering economy with a focus on growing the workforce with targeted support for working parents, over-50s and those unable to work because of health issues and disabilities.

Those measures include:

• Thirty hours of free childcare for children of working parents aged nine months and over from 2025.
• Increasing the tax-free allowance for pensions from £40,000 to £60,000 a year in addition to abolishing the tax-free cap.
• Abolishing the work capability assessment, allowing those with health problems to look for work without losing benefits but, alongside that;
• A tightening of sanctions for those seeking work, including for those working less than 18 hours a week.

Mr Hunt’s next big announcement was a move to incentivise business investment, with up to £9bn a year in tax reliefs for companies making productivity-boosting investments, in the hope of bolstering long-term economic growth.

It reportedly follows furious lobbying from company bosses and backbench Conservative MPs, concerned about a sharp rise in corporation tax from April from 19 per cent to 25 per cent. The chancellor said the regime of “full expensing” would last for three years, with the intention to keep the tax break permanently.

He said it would foster an “enterprise economy” in the UK and argued that the changes would give the UK the “best investment incentives of any advanced economy”.

Mr Hunt said, “We tackle the two biggest barriers that stop businesses growing, investment incentives, and labour supply.

“Today we build for the future, with inflation down, debt falling and growth up. The declinists are wrong and the optimists are right.”

The chancellor outlined these plans for the country’s finances while increasing turbulence in global financial markets continued as banking shares were shaken by concerns about Credit Suisse - one of Europe’s biggest lenders - exacerbating days of unrest triggered by the collapse of the Silicon Valley Bank.

However, updated forecasts from the Office for Budget Responsibility (OBR), the government’s tax and spending watchdog, reportedly revealed that the economy would still shrink by 0.2 per cent in 2023. Though it would avoid two consecutive quarters of contraction; the technical definition of a recession.

As widely reported ahead of the budget, Mr Hunt said his measures would bring down inflation while “helping people struggling during tough times”.

The OBR said inflation was forecast to fall by more than half, from a peak of 10.7 per cent in autumn 2022 – the highest rate since the early 1980s – to 2.9 per cent by the end of the year, in an upgrade from November estimates.

Source: The Guardian

(Quotes via original reporting)

Jeremy Hunt has laid out his Spring Budget and his intention of “proving the doubters wrong” by using a suddenly stronger economic performance to help fund new tax breaks for business investment and a drive to get people back into the workforce, The Guardian reports.

As he introduced £22bn of higher spending and tax breaks in the next financial year, the chancellor said the British economy would avoid a technical recession in 2023 with inflation falling by half. However, the economy is still expected to shrink this year.

In a move reportedly intended to keep older workers from retiring early, Mr Hunt announced a surprise decision to scrap the £1m cap on tax-free pension savings. He said, “No one should be pushed out of the workforce for tax reasons.”

Labour said the change would benefit only the 1 per cent with the biggest pension pots.

The chancellor announced a reboot of Britain’s faltering economy with a focus on growing the workforce with targeted support for working parents, over-50s and those unable to work because of health issues and disabilities.

Those measures include:

• Thirty hours of free childcare for children of working parents aged nine months and over from 2025.
• Increasing the tax-free allowance for pensions from £40,000 to £60,000 a year in addition to abolishing the tax-free cap.
• Abolishing the work capability assessment, allowing those with health problems to look for work without losing benefits but, alongside that;
• A tightening of sanctions for those seeking work, including for those working less than 18 hours a week.

Mr Hunt’s next big announcement was a move to incentivise business investment, with up to £9bn a year in tax reliefs for companies making productivity-boosting investments, in the hope of bolstering long-term economic growth.

It reportedly follows furious lobbying from company bosses and backbench Conservative MPs, concerned about a sharp rise in corporation tax from April from 19 per cent to 25 per cent. The chancellor said the regime of “full expensing” would last for three years, with the intention to keep the tax break permanently.

He said it would foster an “enterprise economy” in the UK and argued that the changes would give the UK the “best investment incentives of any advanced economy”.

Mr Hunt said, “We tackle the two biggest barriers that stop businesses growing, investment incentives, and labour supply.

“Today we build for the future, with inflation down, debt falling and growth up. The declinists are wrong and the optimists are right.”

The chancellor outlined these plans for the country’s finances while increasing turbulence in global financial markets continued as banking shares were shaken by concerns about Credit Suisse - one of Europe’s biggest lenders - exacerbating days of unrest triggered by the collapse of the Silicon Valley Bank.

However, updated forecasts from the Office for Budget Responsibility (OBR), the government’s tax and spending watchdog, reportedly revealed that the economy would still shrink by 0.2 per cent in 2023. Though it would avoid two consecutive quarters of contraction; the technical definition of a recession.

As widely reported ahead of the budget, Mr Hunt said his measures would bring down inflation while “helping people struggling during tough times”.

The OBR said inflation was forecast to fall by more than half, from a peak of 10.7 per cent in autumn 2022 – the highest rate since the early 1980s – to 2.9 per cent by the end of the year, in an upgrade from November estimates.

Source: The Guardian

(Quotes via original reporting)