Spring Budget 2023 - 6 Big Announcements for Employers
On March 15th, 2023, Chancellor of the Exchequer Jeremy Hunt unveiled his highly anticipated 2023 Budget.
Much speculation has led up to this event. An ongoing cost of living crisis and a series of strikes across public sectors means the UK isn’t really ‘sitting pretty’ at the moment. There was a lot for the Chancellor to address in his Spring budget statement, including his plans for the economy moving forward.
Among topics of interest for business and the overall public were energy bills and pensions as well as reforms to the benefits and childcare systems. And from the employer’s point of view, there were a number of key announcements. We’ll dive into these briefly to unpack exactly how this budget will likely affect you as an employer.
Here are six ways the 2023 budget impacts employers and their businesses.
The chancellor confirmed that 12 new investment zones will launch across the UK this year.
Like Freeports, these investment zones will be areas where employers can take advantage of tax breaks, such as on employers’ National Insurance (NI). Within these zones, employers will no longer have to pay employers’ NI for certain employees.
This will affect larger regions like Manchester and Liverpool. Employees in these investment zones will be classed under a different NI category, so employers can calculate the correct NI.
There was much discussion in the run-up to March’s budget as to whether there would be changes to the pension tax-free allowance.
Indeed, the annual pension allowance will increase by 50% (in other words, how much employees save before paying tax) - from £40,000 per year to £60,000 per year.
The bigger news, however, concerns the Lifetime Allowance (LTA). The 2023 budget will see this abolished entirely, allowing employees to grow their pensions without limit or tax consequences.
The cap is currently set at £1,073,100 but will no longer apply from April 2023 and will be officially abolished in 2024 when legislation allows.
Another major announcement from the Spring budget came in the form of some substantial childcare reforms.
It’s reported that some parents in England are having to spend up to 80% of their take-home pay on childcare. And currently, eligible employees are only able to claim 30 hours for children aged three-four years old.
As such, the Chancellor is increasing the number of free childcare hours for 38 weeks of the year. The change will be gradual:
To start, parents will be able to access 15 free hours for children aged two-three.
Then, they will get 15 hours for children between nine months and three years old.
Eventually, parents will be able to claim up to the full 30 hours of free childcare for children aged nine months to three years of age.
For employers and employees alike, these measures should be a welcome improvement. Parents could return to work sooner or opt for part-time hours while raising their children. Among other benefits, these new measures should reduce discrimination against women and boost the wider economy.
Longterm sickness and disability
In addition to tackling childcare issues, several measures were also announced during the 2023 budget to improve long-term sickness and disability.
Among some of these measures are a new voluntary scheme for disabled people to seek support from the government in getting back into work and a new pilot program called WorkWell which will take a blended approach to employment and health support.
These measures should help improve employment among those with disabilities and long-term health issues.
Hunt’s March budget speech also introduced a new concept regarding apprenticeships: the ‘returnship’.
Targeted at those over 50 keen to return to work or start a new career, this new scheme will offer improved access to training. It will mean workers of any age can upskill flexibly while taking into account previous experience to accelerate training.
As part of this program, older job seekers will be able to access streamlined apprenticeships, sector-based program placements, and skills boot camps, among other initiatives.
The Tax Gap
The ‘tax gap’’ has been an ongoing issue in England. This is the difference between the tax that should be collected and the actual amount HMRC receives.
To address this, the Chancellor is introducing several measures, including £47.2 million invested in HMRC to help them identify employees actively avoiding paying their taxes. But the fund will also provide support to those struggling to pay their tax debts.
In addition to the above, there are a number of other topics still in play:
Family carers and neonatal leave - The right to these types of unpaid leave is currently still under discussion.
A review of workers’ rights to predictable hours - This is slated to be discussed in the summer of 2023 and could lead to fewer employees being stuck on zero-hour contracts.
PayFit Point of View
Here’s a word from our Payroll Expert, Rebecca Russell, on the Spring budget:
“Considering the number of changes to national insurance legislation in the 2022/2023 tax year, I'd been quite surprised that the 2023/2024 tax year was looking so straightforward. As we already have a threshold and categories for freeport workers, hopefully, HMRC will make it easier for software developers and use these for investment zone workers too."
Stay in the know with PayFit
Budgets are always a prime time for payroll legislation changes. But the good news is you don’t have to stay on top of each and every announcement just to maintain compliance. A good quality payroll software can do all this for you.
With so many options to choose from on the marketplace, it can be difficult to identify the right payroll software for your business. It’s worth looking out for those that are HMRC-recognised and backed by real CIPP payroll experts, so you’ll have peace of mind that new rates or threshold changes announced are applied.
At PayFit, these experts are involved in every stage of our development cycle. Which means payroll expertise is baked into every aspect of our product. There’s no better way to keep on top of compliance.