Richard Lishman explains what the government's spring budget means for your finances.
The priority of the Spring Budget 2023 was to grow the economy by removing barriers to investment in businesses and incentivising people to work. Chancellor of the exchequer, Jeremy Hunt, was adamant that the economic plan since mid-October 2022 was proving successful and that they would stick to it moving forward. Though the takeaway message was that our economy is on the right track, Jeremy acknowledged the importance of remaining vigilant in order to protect the continued economic growth of the UK.
Among the top headlines to come from this budget, the UK is to avoid a technical recession this year, according to the Office for Budget Responsibility (OBR). Forecasts are surprisingly positive for the coming years, with the OBR predicting 1.8 per cent growth in the next 12 months, followed by consistent economic growth until 2027. Inflation is set to fall – by more than the targeted half – from 10.1 per cent to 2.9 per cent by the end of 2023. This will certainly be welcomed by the general population and businesses alike if it does indeed come to fruition.
The success of the government’s ‘levelling up’ partnerships was also highlighted, with Mr Hunt announcing investment for 12 new projects. And let’s not forget the 11p per pound reduction in duty on draft beer in UK pubs!
So, how is the Spring Budget going to impact dental professionals?
Of note for practice principals will be the rise in corporation tax from 19 per cent to 25 per cent, which will be payable on any profit over £250,000 as of April 1, 2023. Those businesses with profits between £50,000 and £250,000 will pay a corresponding tax amount somewhere between 19 per cent and 25 per cent.
On a positive note, dental practices will benefit from an increase in the investment allowance to £1 million. This will be supported by a ‘full capital expensing’ concept that enables every pound invested in IT equipment, plant or machinery to be immediately deducted in full from taxable profits. This will be in place for the next three years and made permanent as soon as the government can responsibly do so. For dental principals, this could provide the support needed to invest in capital equipment for the practice, encouraging business development and a rise in long-term revenue.
As part of his bid to “get Britain back to work”, Mr Hunt announced the abolishment of the tax-free lifetime allowance (how much people can put in their pension pots before they are taxed), which was previously set at £1.07 million. This could be very useful for those approaching the limit as they can now continue to save for retirement without concern for a hefty tax bill. The annual pensions allowance has also risen from £40,000 to £60,000, so all professionals will be able to put more away for their futures. The goal is to encourage older generations to stay in work longer and even entice back those who retired early in order to strengthen the UK workforce and give the economy a much-needed boost.
Outside of work, the extension of the energy price guarantee will benefit everyone for a further three months – with it now remaining in place until June 2023. This will keep average household bills at £2,500, preventing an increase of up to £3,000, as was previously expected. Fuel duty has also been frozen, so the 5p reduction will remain in place for another year.
Those with young families will have been pleased to learn that 30 hours of free weekly childcare will become available for all children under three years old. This will be offered for 38 weeks of the year (term time) and be given to every household where both parents are working at least 16 hours per week. It will eventually include all children from nine months old. While this is good news for many families, the reform will be introduced in stages. It won’t start coming into effect until April 2024, when 15 hours of childcare will be available for all two-year-olds. From September 2024, it will cover children of nine months and up.
So, while there weren’t too many surprises from this year’s Spring Budget, the messages are generally positive. The UK economy seems to be in recovery and the outlook is far more optimistic than it was just six months ago! More support for small-to-medium-sized businesses and greater opportunity to save for retirement are two useful takeaways for many dental professionals. However, challenges definitely remain with the cost-of-living crisis, high energy bills and workforce worries – especially in dentistry. As ever, only time will tell if the government’s apparent optimism is well-founded.