2023 Spring Budget – The Hunt for Budget Predictions
Jeremy Hunt will deliver his Budget on Wednesday 15 March.
Pre-budget predictions are notoriously hard, but there is no harm in speculating. Let’s try to piece together the clues about where we might be heading.
Most of us have probably tried to purge our memories of the Truss/Kwarteng mini-Budget in September, but I suspect it will still be lingering in the minds of Sunak/Hunt.
Jeremy Hunt’s November 2022 Autumn Statement called a halt to the tax cuts announced in his predecessor’s mini-Budget. He has positioned himself as a ‘sound money’ Chancellor and I expect he will want to uphold this image.
With a general election on the horizon and Labour leading in the polls, it wouldn’t be surprising if his rhetoric draws on themes such as long-termism and stability.
Jeremy Hunt identifies as a tech entrepreneur. He reminded us of this in the speech he gave at Bloomberg in January, the opening lines of which were apparently crafted by AI.
In a bold pitch that wouldn’t have been out of place on Dragon’s Den, he made it clear that he wants the UK to be the first choice for anyone thinking of starting or investing in an innovation or technology-centred businesses. He believes Britain can be the world’s next Silicon Valley. The ‘London / Oxford / Cambridge triangle’ even received special mention as a shining example of what’s possible.
He used the speech to reaffirm the government’s commitment to halving inflation and he has expressed the view that tax cuts would be incompatible with this goal. With recent inflation having been driven by rising costs rather than unchecked consumer demand, I find it hard to believe that tax breaks couldn’t be targeted to ease the financial pressures on struggling households and businesses without adding to inflationary pressures though – and such measures could help a lot of people sleep at night.
He also unveiled ambitious plans for delivering economic growth. His growth plan is four-pillared – focusing on Enterprise, Education, Employment and Everywhere. He neither confirmed nor denied whether AI was responsible for the four-pillared plan too, or the profuse use of alliteration.
Alongside the plans for growth, he wants to the UK to have the most competitive tax regime of any major country.
What can we expect?
And so, to the tax predictions…
In view of the Chancellor’s stated intentions, you would be forgiven for thinking there might be reasons for UK businesses to be quietly optimistic. But, before we get too carried away, I should reiterate that he doesn’t believe there’s ‘headroom’ for meaningful tax cuts.
Immediate reductions in Corporation Tax rates seem particularly unlikely. After all, it was less than six months ago that he called time on Kwasi Kwarteng’s short-lived proposal to freeze the Corporation Tax rate at 19%. A longer-term commitment to bringing rates down when the growth kicks in or keeping in step with the G7 may not be out of the question though.
Tax incentives could take the form of an extension to the Capital Allowances ‘super deduction’ which is due to end this month, or further changes to Research & Development (R&D) tax reliefs. But having seen the Chancellor’s recent question-dodging on the former, I suspect this is unlikely.
Freeports may feature in his announcements. I expect we will also hear more about the new ‘investment zones’ which (in a departure from the original investment zone proposals announced by Truss/Kwarteng) were being refocused to ‘leverage our research strengths’ in a small number of locations.
An additional 250,000 taxpayers are already about to be dragged into the top rate of Income Tax of 45% when the income threshold decreases from £150,000 to £125,140 next month, as announced in November.
The annual Capital Gains Tax allowance is also being squashed down from £12,300 to £6,000 from April 2023, and then even further to £3,000 from April 2024.
Again, tax giveaways seem unlikely on the personal tax side. As Income Tax and Capital Gains Tax changes are already in motion, further announcements of any description could be seen as unsettling.
That said, the Chancellor is keen to entice early-retirees and those displaced from work by the pandemic back to the workforce. He could look at reducing National Insurance Contributions for returning workers and/or relaxing the lifetime pension allowance.
The overseas element
Non-doms are never far from the headlines, as Rishi Sunak knows all too well.
Jeremy Hunt believes that abolishing the existing tax regime for UK resident non-doms would be bad for the UK. Even so, this remains a heavily politicised issue, with Labour pushing for reform. I doubt that sudden changes are likely under the current government, but it isn’t inconceivable that the Chancellor could acknowledge the public perception of unfairness, perhaps by announcing a consultation or review.
31 January was not just the Self Assessment filing deadline this year. It was also the deadline for overseas companies owning UK land or property to register with Companies House and disclose who their beneficial owners are. It’s estimated that more than 10,000 overseas companies did not register. I wonder if we will hear more about steps the government intends to take to clamp down on these errant companies.