How the Spring Budget affects employers

On the 15th of March, UK Chancellor Jeremy Hunt announced the Spring Budget 2023. The goal for this year’s budget was to get Britian “back to work” as there are currently around 1.1 million job vacancies in the UK and 1.3 million people out of work. While the announcement covered an array of topics and discussion points, the main points to note for employers were the changes to employee pensions and the motive to boost the UK workforce.

Return to work for over 50’s

The UK has over 3.5 million people who have left work ‘pre-retirement’, which is classed as between the ages of 50 and 64. There were around 320,000 pre-retirement workers who left the workforce during the COVID-19 pandemic and who never returned. To assist people over 50 in returning to work, Hunt announced that there will be a ‘returnship’ apprenticeship programme introduced. This will involve encouraging older workers into sector-based work academies as a way of improving their skills and making it easier for them to re-join the workforce.

Changes to employee pension schemes

To tackle workers taking voluntary early retirement to avoid tax charges on their annual pension savings, the Chancellor shared that the government would increase the annual allowance (AA) from £40,000 to £60,000. The AA is the amount a person can save towards their pension each year before incurring a tax charge. Hunt hopes that this will help retain highly skilled, experienced workers, such as hospital doctors, for longer. Additionally, the cap on the amount that people can save for their pension throughout their lifetime, tax free (currently £1.07m), is being abolished.

More support for workers

As well as an emphasis on boosting the UK workforce, the need to better support workers was highlighted. This will include rolling out an occupational health pilot subsidy scheme for SMEs. Improving health services in the workplace will help employees’ physical and mental health, meaning happier employees.

Making childcare more accessible

Parenthood is something that can affect people’s working lives – especially when it comes to childcare and flexible working. To help this, the Chancellor announced that parents will be eligible for free childcare from nine months, once both parents are employed and earning less than £100,000 a year. This will be introduced in phases, beginning April 2024. The government are hopeful that by putting these measures in place, parents will feel more supported coming back to work and ease the pressure of balancing work and family life.

Corporation Tax

Although Hunt announced little about Corporation Tax, he confirmed the planned increase on Corporation Tax from 19% to 25% will go ahead on taxable profits over £250,000. The Chancellor did reiterate that even after the Corporation Tax increase, the UK remains to have the lowest headline rate in the G7, and only 10% of companies in the UK are expected to pay the full 25% rate. He also emphasised that having a lower corporation tax in previous years did little to encourage new investment by businesses.

The Spring Budget included several changes that businesses will need to keep on top of – some beginning as early as April 2023 and others to be implemented in the not-too-distant future. Find out more about the Spring budget.

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This content may have been developed with the assistance of AI tools. Content is reviewed by a member of the Bright team before publication. Guidance on legislation can be obtained from your industry body.