The Chancellor Jeremy Hunt presented his Spring Budget to Parliament today (6 March 2023). South East Business has curated a collection of responses from leaders within the business community…
Martin Verrall, practice leader for Grant Thornton UK LLP in Gatwick
“With the economy technically in recession, it was no surprise that today’s budget included a raft of measures to boost growth and incentivise investment. While details were thin on the ground, the devolution of further powers to local areas – with Surrey pulled out as one of those in line to benefit – will be welcomed as a valuable route to tackling localised challenges.
“With access to talent being a significant issue for employers in the South East, the further 2% reduction to employee’s NIC, as well as improvements to childcare support being brought in to decrease job vacancies, will be particularly appreciated.
“Overall, the Chancellor’s permanent cuts in taxation and support for dynamic economies are ambitious, but hopefully will bring positive change to businesses and encourage long-term growth.”
Menzies LLP’s accountancy and strategic advisory experts
2p reduction in National Insurance contributions
There has been much chatter about tax cuts in the lead up to the Spring Budget, and today the Chancellor lowered National Insurance rates for employees by a further 2p, following on from a previous cut in November. The rate of NI for those who are self-employed will also be cut by 2p.
Richard Godmon, tax partner, said: “While a further 2p cut to National Insurance contributions is seemingly good news, many still won’t be better off due to the freeze in tax band thresholds.
“It was disappointing to see no such cut in the NI rate for employer-side National Insurance contributions. This would have been a measure that would have been welcomed by struggling businesses in the retail and hospitality sectors especially.”
Non-dom tax regime abolished and to be reformed
The government has announced it will reform the tax break for wealthy foreign residents in the UK who have non-domiciled tax status.
Craig Hughes, head of private client tax services, said: “The abolition and reform of the non-dom tax scheme seems to have been a largely political decision. The non-dom rules were complicated previously and so arguably reform was needed.
“However, while this might provide a short-term boost to the Treasury, we also need to consider the long-term impact: these changes may backfire with a sizeable impact to the UK economy as people may choose to relocate elsewhere.
“Firms, especially in the City, are already facing intense competition in the race for global top talent, and the non-dom tax status has thus far been a powerful incentive to work in the UK.
“The Chancellor said himself in 2022 that these individuals could just as easily choose to live in other countries and contribute to their businesses and economies – and now they may well do so.
“It also largely remains to be seen how rules around Inheritance Tax (expected to apply after 10 years of UK residency) will shift to accommodate non-dom rule changes – this will be significant to many.”
New pension measures and ‘British ISA’
The Chancellor announced that he would unlock more pension fund capital, give new powers to the pensions regulator and FCA, and make sure there are vehicles that make it easy for pension funds to invest in UK growth opportunities.
He also announced a reform to the ISA system “to encourage more people to invest in UK assets”. The new British ISA will allow an additional £5,000 annual investment for investments in UK equity with all the tax advantages of other ISAs.
Craig Hughes, private client tax partner, said: “An infusion of capital into British companies through pension funds and the new British ISA could undoubtedly foster greater economic growth, particularly for SMEs. However, the devil will be in the detail here, and the specifics remain to be seen.
“Will the new ISA integrate into the existing ISA framework or become a standalone product, for example? Companies may find it more manageable if structured as a separate product, allowing for efficient investment management.”
Permanent full expensing for leased assets
In the Autumn Statement, the Chancellor announced permanent “full expensing”, a £10bn tax cut for businesses. He today announced his intention to publish draft legislation for full expensing to apply to leased assets.
Andrew England, tax partner, said: “It was disappointing that the Autumn Statement didn’t include leased assets in the permanent full expensing regime announcement, so it is good to see that it has now been considered following representations.
“There remains some vagueness around the timing of its implementation, however, with the Chancellor claiming it would be brought in ‘as soon as affordable’. This is a crucial form of tax relief for many businesses and so must come into force this year.
“The leasing exemption from claiming full expensing also currently applies to companies who commercially protect and own their assets at a group level and effectively ‘lease’ them internally. This must be dealt with as quickly as possible as currently, these companies are at a significant disadvantage with regards to tax relief to a standalone company.”
Increase in VAT threshold for small businesses
The Chancellor announced he would increase the VAT registration threshold from £85,000 to £90,000 from 1 April – the first increase in seven years, which he claimed would lift tens of thousands of businesses out of paying VAT.
Richard Godmon, tax partner, said: “The move to enable more small businesses to reclaim VAT will be welcomed by those now included, allowing them to retain more of their income and potentially invest in growth or other aspects of their operations.
“Yet while this is a step in the right direction, there are many more who would benefit from a higher threshold. SMEs are arguably the engine room of the economy and they must be supported to thrive and invest for growth.”
Paul Lavercombe, tax partner at BDO in the South East
“The Chancellor was under pressure to deliver tax cuts, and while this wasn’t forthcoming for businesses with some hoping there would be a reduction to corporation tax signposted, taxpayers will welcome the national insurance cuts announced.
“Despite being pitched as a Budget for long-term growth, there was very little for business. The only obvious winner being the creative industries. Employers will welcome the measures announced today around lifting the child benefit threshold to £60,000 as it will help employees.
“For smaller businesses, lifting the threshold for VAT registration to £90,000 will be popular despite being limited. The proposed extension of full expensing to leased assets may also encourage investment by businesses in the region.
“It will be interesting to follow the consultation around the “British” ISA which could bring an additional £5,000 tax free allowance for individual investors but should also help to stimulate investment in regional growth businesses across the UK.”
Jonathan Rolande from the National Association Of Property Buyers
“We saw a mini recovery in the housing market in January but it was fragile and lost momentum in February. I was hoping to see the property market directly targeted by the Chancellor today. I was hoping to see this not because I want to see house prices rise – we’ve had quite enough of that over the past few years.
“But what the market desperately needs is some optimism. Right now you can’t say that it is working well for anybody – landlords are leaving the sector, tenants are paying huge rents in an ultra-competitive field, sellers in many areas have little hope of finding a reliable buyer and the buyers themselves have seen borrowing cost rocket, without the rebalancing of a big drop in asking prices.
“Mr Hunt had an opportunity today to inject some optimism into the housing market, but he’s fallen short.
“Without the hope that prices will remain steady and buyer numbers will increase, who will invest into buying land and building the hundreds of thousands of homes we need?
“Who will look to convert disused industrial, retail and other commercial sites back into desperately needed homes?
“What will prompt a downsizer to move and free up family-sized homes – often paying £10,000 in taxes and fees for the privilege of doing so?
“What will encourage a landlord to insulate their property, making life cheaper and more comfortable for their tenants?
“I wanted to see the property market focussed on to begin the process of giving hope to first time buyers that they will get the same opportunity to own a home that their parents and grandparents had.
“Other than tinkering with Capital Gains Tax to allow sellers to pay less on their profits and a Stamp Duty amendment that will make very little difference to most buyers. And there was barely a mention of property and the crisis we face.”
Richard Ellard, head of real estate at Thomson Snell & Passmore
“The Chancellor’s most recent Budget included a range of announcements which will impact on the Real Estate sector. Those with portfolios of residential properties in particular will be affected.
“While on one hand they may welcome the news that the higher rate of CGT for residential property disposals will be cut from 28% to 24% to encourage landlords and second home-owners to sell their properties, they may be disappointed by the fact that Multiple Dwellings Relief will be abolished from June after showing no evidence of promoting investment in the private rented sector.
“In addition, those who have portfolios of properties used for holiday lets will be impacted by the fact the Government will abolish the Furnished Holiday Lettings tax regime, eliminating the tax advantage for landlords who let short-term furnished holiday properties over those who let residential properties to longer-term tenants. This will take effect from 6 April 2025 and draft legislation will be published in due course.
“There were also announcements which are likely to be of interest to landowners and developers. In particular, the news that the government is launching round two of the Local Nutrient Mitigation Fund, which will support delivery of 30,000 homes by 2030 that would otherwise be stalled due to high levels of nutrient pollution.
“In addition, in order to boost capacity in the planning system, the government is committing £3 million to match industry-led funding for a skills and education programme to attract more people to take up roles as local planners in planning authorities.
“The Chancellor also announced that, following consultation, the Government will extend the existing scope of agricultural property relief from 6 April 2025 to land managed under an environmental agreement with, or on behalf of, the UK government, Devolved Administrations, public bodies, local authorities, or approved responsible bodies.
“The government will also establish a joint HM Treasury and HMRC working group with industry representatives to identify solutions that provide clarity on the tax treatment of ecosystem service markets.
“The immediate reaction from the industry demonstrates a slight sense of frustration, with the feeling that an opportunity to reinvigorate the Real Estate industry has been missed.
Mike Burton, land director at Metis Homes, said the budget was “rather disappointing” and “did very little for the housing industry as a whole”.
Melanie Leech, chief executive, British Property Federation, said: “There’s little in today’s Budget for the property sector to cheer about. Further devolution deals are welcome as are the announcements of support for delivering more homes in a small number of places, but this falls far short of a bold strategy for delivering the homes needed across the country.”
“As always, the longer term roll-out and impact of the changes announced today remains to be seen, but there is certainly plenty for those in the real estate sector to digest and act on in due course.”
Nick Hobden, head of employment at Thomson Snell & Passmore
“Significant tax cutting measures were aimed at working families, encouraging them to work more to ‘make work pay’, as Mr Hunt repeated during his speech.
“He has introduced another 2% reduction in employee national insurance contributions, to come into force in April making a total of 4 percentage points’ worth of reductions since January, equating to an average of £900 more cash in families’ pockets for 2024.
“However, for employers facing rises to the National Living Wage rates from April, they will not see the upside of this tax reduction.”
Kevin Fitzgerald, UK MD at Employment Hero
“No rabbits under the Chancellor’s hat today, in what was a frustrating Budget for leaders of small and medium sized businesses.
“Whilst it is right that the government focuses on initiatives that will help individuals and household budgets during the current cost of living crisis, the Chancellor has provided little support for SMEs by way of meaningful tax cuts and investment for growth.
“A survey we conducted of 540 SME business leaders found that what they want most from the government is tax incentives and relief measures, followed by funding for skills and workforce development, and support for technological adoption and digitisation.
“The government has made it clear that getting people back into work is a priority, and we are geared up to work with the government to revolutionise the employment journey for job seekers and employers, alleviating the dependency on benefits by fostering sustainable employment pathways.
“We would have liked to have seen an expansion of the government’s back to work programme to enable more of the 1.32 million people currently unemployed into work.
“Our employment app, Swag, will support a reduction in the unemployed and the 9.28 million people economically inactive, by channelling job seekers directly to SMEs in key sectors like hospitality, retail, construction and care, as well as helping individuals with health conditions looking for work-from-home opportunities.
“Whilst there are green shoots in the economy with inflation coming down and a short recession all but over, business leaders need to remain resilient and prepared for change and disruption, as we edge closer to a general election and a potentially new government in charge.”
