Spring Budget: Ask the experts

The Chancellor of the Exchequer, Jeremy Hunt, presented his 2023 Spring Budget to Parliament on 15 March. Here, some of Bristol’s lawyers, accountants, estate agents and banks react to his statement and look at the important changes to consider in the next tax year...

How has the Spring Budget affected tax arrangements for businesses?

The Chancellor’s drive for growth in the Spring Budget has created interesting tax planning opportunities for businesses and their owners. Jeremy Hunt stepped up to the Despatch Box to provide measures that he said would deliver growth to the UK through targeted investment and support for businesses and their workers.

Prior to his announcement, many businesses were concerned about the upcoming increase to Corporation Tax in April, which will see the rate of tax rise from 19 per cent to 25 per cent for businesses with profits of £250,000 or more.

Only those with profits of £50,000 or less would continue to pay this tax at 19 per cent, with those between these two thresholds paying tax at a tapered rate. The Chancellor’s introduction of ‘full expensing’ – 100% tax relief for spend on qualifying plant and equipment – may help some companies grappling with this tax increase, albeit replacing existing reliefs for most.

What are the key points to consider today when it comes to thinking about sustainability and ethical issues in terms of personal finance?

Banks could be playing a critical role driving change on major issues such as climate change and inequality. But unfortunately most banks are not setting strict enough minimum standards, which means that your money could be supporting anything from new fossil fuel projects through to factory farming or deforestation. Our biggest high street banks continue to funnel billions into the fossil fuel sector, when it is precisely our dependence on fossil fuels that is driving up our bills, and not to mention causing immeasurable harm to the planet.

We commissioned some research recently that showed that nearly three quarters of the UK public (73%) believe we need to collectively invest in long-term solutions to the issues the world is facing. There is a striking disconnect for UK consumers between the rising cost of living and decisions being made by banks on what they choose to finance. Thankfully, we are seeing a real change in awareness of the links between personal finances and the wider world. Your banking and finance decisions are now a

Rob Brown, Tax Partner at Milsted Langdon’s Bristol office, said: “For the next three years businesses will be able to write off the full cost of qualifying plant and machinery expenditure in the same year they make the investment.

“This new relief sits alongside a number of existing Capital Allowances to help firms better manage their annual tax bill through investment. This new measure goes some way to replacing the lost relief available from the Super Deduction, which ends on 31 March.” part of being a conscious consumer. You can consult the likes of Which? and Ethical Consumer magazine for independent, impartial advice on green financial products, rating them on sustainable and ethical criteria, and signposting the best buys that you can trust.

R&D tax credits also provide an important Corporation Tax relief to many SMEs. In the Autumn Statement, Jeremy Hunt announced changes that would restrict the rate of tax relief and credits for some small and medium-sized enterprises (SMEs).

However, to support “British Ingenuity”, the Government has decided to introduce a new enhanced tax relief for loss-making R&D-intensive SMEs. Eligible companies will be able to receive a tax credit worth £27 from HM Revenue & Customs (HMRC) for every £100 of R&D investment they make.

“This additional relief will be somewhat limited, but it will play a role in driving growth among the most pioneering businesses,” added Rob.

The prevalent myth that you have to be very wealthy to make a difference with your money couldn’t be further from the truth. Even a small amount in savings or investments with a sustainable provider reroutes money from harmful sectors into positive ones, and sends a powerful message to the wider finance industry that enough is enough. It’s through collective action that putting your money with a sustainable bank supports a wider ecosystem of green finance that brings about real change.

The removal of the lifetime allowance tax charge and increase to associated pension allowances has raised many questions about how this will look for pension savers.

We are waiting for the finer detail to be published to fully understand the changes but initially it seems positive for people who are high earners such as senior NHS employees who have been facing large tax bills over recent years.

It is effectively a 0 per cent tax charge, so people who were planning to access their pensions but were either exceeding or coming close to the lifetime allowance (LTA) may not need to worry about an extra tax charge in the new tax year. However, with the general election likely in 2024 and a potential new government, a lot of thought needs to go into whether you take advantage of the changes now to be then potentially impacted in the next 18 months to two years.

Therefore, contributing as much as you can before then may not be the most efficient solution and needs to be treated with caution. Another consideration is that the tax-free lump sum entitlement will now be capped at a maximum of £268,275, rather than 25 per cent of the entire pension pot. If a future Labour government reintroduces the LTA, as the party has pledged to, there is uncertainty over what level it will be reintroduced at and the size of any future tax-free lump sum.

Before you make any hasty decisions, I suggest speaking with a financial planner to have advice on the best course of action.

• Lucia Rippa, associate director at Evelyn Partners in Bristol

The property industry had low expectations of the Budget and it is fair to say, Jeremy Hunt lived up to all of them. It is no secret that very little money is available for crowd-pleasing policies but, the property market did not receive a single mention. Following on from the mini-budget in 2022, where we saw an immediate spike in interest rates and a huge dent in house buyer confidence, some in the industry took a sigh of relief when the Budget announced was actually quite boring. Predictable can sometimes be good, the housing market thrives on stability and confidence.

Potential buyers can now access better-Fixed Rate mortgages and for a longer period than at the end of 2022. The last thing they or house sellers needed was to see the financial markets spooked or for the turmoil to return. Following September 2022, house prices fell for the first time since the beginning of the pandemic. The timing, prior to Christmas, afforded many breathing space, time to take stock of the market, their personal situation and the outlook on the economy. Sure, we helped those who needed to move, marriages, births, schooling, death and divorce always provide a base load of transactions but spur of the moment, aspirational sales dried up.

Pleasingly, 2023 has started in a far more positive manner, sellers are more realistic and buyers more able to finance a purchase. Sales volumes are returning, prices are ticking upward slightly and the number of great homes increasing. Across Bristol, the housing market is waking from its winter slumber and Spring looks like it will be a great time to revitalise those moving dreams.

So while the budget didn’t provide any fresh impetus or help for the housing market, it didn’t turn the clock back either. As I said, sometimes boring is best and stability is key.

The UK government’s commitment to promoting work and productivity is evident in the Spring Budget, which includes major reforms to support parents with childcare costs and encourage non-employed individuals over 50 to return to work. The protection of disabled individuals’ benefits while they are employed further emphasises the importance placed on employees and enterprise.

The pension reforms announced are a positive step towards incentivising high earners to work and invest in their pensions. By increasing the annual pension contribution limit from £40,000 to £60,000, individuals with the means to do so will have more flexibility to save for their retirement.

Furthermore, the removal of tax charges via the lifetime allowance for pension values exceeding £1,073,100 will be particularly beneficial to high earners, including NHS doctors, who have previously been disincentivized from working due to the pension-tax regime.

For consumers, while the three-month extension to the energy support scheme will provide critical assistance for those living on the edge, the long-term effects of the cost-of-living crisis will continue to cause stress and anxiety for many people, undoubtedly posing a challenge for the government for some time to come.