UK Spring Budget 2023: What to expect?

UK Chancellor of the Exchequer Jeremy Hunt is set to announce several reforms for pensions, childcare, energy, corporation tax and fuel duty in his Spring Budget later today (15 March).

Hunt is expected to focus his budget on halving inflation - which remains at a 40-year high of 10.1% - and introduce reforms in an attempt to boost economic growth.

He will announce tax breaks for businesses, who will be able to offset investments in the UK to reduce their corporation tax bill.

Corporation tax, on the other hand, is set to rise from 19% to 25% in April 2023, although there has been resistance on the future hike as many Tory MPs believe an increase could put companies off investing in the UK.

This sentiment was shared by Brian McBride, president of the Confederation of British Industry, who said an increase to corporation tax could hinder firms' investment plans.

"The Chancellor has no time to waste to help Britain compete for investment and keep major wealth creators committed to the UK. Without action, the double blow of the super-deduction expiring and the higher rate of corporation tax coming into would send a worrying sign about Britain's status as a place to do business," he added.

UK GDP grows by 0.3% in January

Pensions are another expected area of focus for the government, after it transpired that the Chancellor is set to increase the annual allowance and lifetime allowance (LTA). The former is set to grow to £60,000 from the current £40,000, while the LTA is expected to rise from £1.07m to £1.8m, back to the level of 2010.

The pension changes are believed to affect mostly high earners who have been significantly impacted by the freezing of tax allowances over the past two years.

These reforms are expected to attract more people in later life back to work, said Steven Cameron, pensions director at Aegon, as the current allowances "act as restrictions [and] can discourage individuals later in their working lives from staying in or returning to the workforce".

The government said today, ahead of the Budget, that it will be extending the Energy Price Guarantee at the current level of £2,500 for an additional three months.

Household energy bills were due to rise to £3,000 a year from April, but the cap will remain in place until the end of June.

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Hunt is also believed to be expanding free childcare for children under two years of age in England. Currently, two-year-olds are only eligible for 15 hours of free childcare, if their parents claim certain benefits. Now, the government is expected to increase the entitlement to 30 hours per week.

The Chancellor is also set to tackle rising petrol prices, since an increase in fuel duty is due in April 2023, with petrol growing by around 12p a litre. He is expected to follow the same path as his predecessor Rishi Sunak in last year's Spring Budget and expand the 5p cut to fuel duty for one extra year.