Budget 2023

Taxation

Confirmation of corporation tax increase to 25% from 1 April 2023, affecting companies with profits of £250,000 and over. Small companies with profits up to £50,000 will continue to pay corporation tax at 19%, with profits between these two figures being subject to a tapered rate.

A new £9bn policy of “full capital expensing” to March 2026 will allow companies to deduct the full cost of investments in new machinery and technology to lower their taxable profits.

A new “enhanced credit” for research-intensive businesses, worth £27 for every £100 of R&D investment.

The income threshold at which point people start paying income tax remains frozen at £12,570 from April 2023. The basic rate band (£12,571 – £50,270) on which income tax is paid at 20% also remains frozen until 2028. There are no changes to the previously announced 40% Higher rate (£50,271 – £125,140) and 45% Additional rate bands (Over £125,140).

The cap on amount workers can accumulate in pensions savings over their lifetime before having to pay extra tax (currently £1m) to be abolished.

Tax-free yearly allowance for pension pots rises from £40,000 to £60,000. This is the most that can be saved in pension pots in a tax year before tax is paid.

The “draught relief” is extended, so that duty paid in pubs will be up to 11% lower than elsewhere. Alcohol taxes will rise in line with inflation from August 2023.

Tax on tobacco to increase by 2% above inflation, and 6% above inflation for hand-rolling tobacco.

Reduced paperwork for international traders, who will be given longer to submit customs forms under streamlined rules.

Living costs

OBR forecast that inflation would fall to 2.9% by the end of this year. The UK will avoid a recession this year with the economy shrinking by 0.2%. It is expected to grow by 1.8% next year, 2.5% in 2025 and 2.1% in 2026.

Fuel duty remains frozen with the 5p per litre cut remaining until March 2024.

Government energy subsidy will continue for another 3 months to 30 June 2023. The typical household energy bill had been set to rise to £3,000 and will now remain at £2,500.

Those on prepayment meters will be charged prices in line with customers paying by direct debit.

£63m funding to help leisure centres with rising swimming pool heating costs and become more energy

Employment

30 hours of free childcare for working parents in England expanded to cover one and two-year-olds, to be rolled out in stages from April 2024. Parents will qualify if they work at least 16 hours a week.

£600 “incentive payments” for those becoming childminders, and relaxed rules in England to let childminders look after more children.

New fitness-to-work testing regime to qualify for health-related benefits.

£63m for programmes to encourage retirees over 50 back to work, “returnerships” and skills boot camps.

A £400m scheme to make more support for mental and physical health available to workers with health problems.

Other

The government plans to create a dozen new investment zones that could become “12 potential Canary Wharfs”.

Commitment to raise defence spending by £11bn over the next five years.

£200m this year to help local councils in England repair potholes.

£900m for new super computer facility, to help UK’s AI industry.