Page 3 - Budget Newsletter - March 2023

• Government borrowing in the first ten months of 2022/23 was £30bn below the OBR
forecast, thanks to better than expected inflows of income tax, national insurance (NICs)
and corporation tax and lower than projected Government spending. However, the debt
pile has now accumulated to over £2,500bn and the OBR forecasts further borrowing of
£131.6bn for 2023/24. The cost of servicing the UK’s Government’s debt is projected to be
around £114.7bn in 2022/23 and £94.0bn in 2023/24, in both instances about a tenth of
total Government expenditure. That explains why one of Mr Sunak’s five pledges is to
reduce debt.

With an election due next year and borrowing still high, the Chancellor was not expected to produce
any significant tax surprises in this Budget. However, the OBR’s more bullish assumptions about
growth gave Mr Hunt scope to reveal some interesting and quite expensive announcements in his
‘Budget for growth’, including:

• The effective abolition of the pension lifetime allowance (LTA), an increase to the annual
allowance to a maximum of £60,000 and a more than doubling of the money purchase annual
allowance (MPAA) to £10,000.

• A continuation of the Energy Price Guarantee at its current £2,500 level to the end of June.

• An extension of 30 hours working families’ free childcare provision to cover children aged nine
months to two years by September 2025. In parallel, the childcare element of Universal Credit
will be substantially increased and the payment made in advance, rather than in arrears, for
those moving into work or increasing their hours.

• A new 100% fully expensed capital allowance to replace the expiring super-deduction and
encourage companies to invest over the next three years.

• A watering down of the changes to SME Research & Development (R&D) tax credits announced
last November.

In this Newsletter we look at the impact of both the changes announced in the Budget and those
revealed last November on various groups of taxpayers. The categorisation is inevitably rather
arbitrary, so it pays to read all sections. Similarly, several of the tax planning points – such as those
listed below in our 12 Quick Tax Tips – are universal.

If you need further information on how you will be affected personally, you are strongly
recommended to consult your financial adviser.

2