Spring Budget predictions

Tim Sarson, head of tax policy at KPMG UK, said:

“Despite the economic ups and downs since the Autumn Statement, there have been some glimpses of hope. However, this does not mean that we expect this to herald a new period of fiscal loosening. The public finances continue to be tight and so the focus remains on reducing borrowing and keeping a careful eye on inflation.  

So, what can we expect in the Spring Statement?

In terms of business taxes, we believe the planned increase to the mainline Corporation Tax rate to 25% will go ahead, no new windfall taxes and a possible announcement on Investment Zones maybe coupled with some form of devolution to allow local decision making.

If there is a rabbit out of the hat for corporates, we think it will be a new capital expenditure regime to replace the super-deduction and alongside some improvements to the R&D regime for green investment.  The challenge will be whether it will be a big enough deal to disrupt policies being rolled out in the US and EU.

In terms of employment taxes, getting individuals back to work promises to be another key area of focus in the Spring Budget, one which is likely to include but not be limited to tax measures.  The government is particularly concerned about the over 50s choosing to take early retirement and/or being impacted by long-term sickness.  They could seek to make the option of staying in work more attractive. An announcement is very possible on the pensions lifetime allowance. We may also see an overhaul of the apprenticeship levy or other training/retraining tax reliefs. Other changes are less likely, especially removing distortions in personal tax thresholds which would be expensive to implement.

We expect the Budget to be quiet for other taxes such as property taxes or VAT.   Fuel duty will almost certainly be frozen and the 5p temporary cut will be extended.

So overall, we expect no headline tax cuts, no tax rises but possibly a big unveil on green and levelling up, in part to compensate for the removal of the super deduction and the increase in the headline rate of corporation tax.”

 

About KPMG UK

KPMG LLP, a UK limited liability partnership, operates from 20 offices across the UK with approximately 17,000 partners and staff. The UK firm recorded a revenue of £2.72 billion in the year ended 30 September 2022.  

KPMG is a global organization of independent professional services firms providing Audit, Legal, Tax and Advisory services. It operates in 143 countries and territories with more than 265,000 partners and employees working in member firms around the world. Each KPMG firm is a legally distinct and separate entity and describes itself as such. KPMG International Limited is a private English company limited by guarantee. KPMG International Limited and its related entities do not provide services to clients.