11 Spring Budget 2023 Takeaways for employers

March 16, 2023
Posted by: Hannah Ingram
Categories: Legislation Updates, Pay, Reward & Benefits

Exploring the key takeaways for employers.

The Spring budget 2023 places a key focus on the UK’s labour shortages and encouraging people to return to work. The four cohorts for back to work are: The long-term sick and disabled, older workers, parents and welfare recipients.

There are also big announcements for pensions, childcare and health in the workplace.

Here are 11 Spring Budget 2023 takeaways for employers.

The Spring Budget 2024 is upon us! See predictions and announcements here

Spring Budget 2023 Summary

Planned abolishment of the Pensions Lifetime Allowance hopes to prevent early retirement for skilled high earners, removal starts from April 2023.
Parents of children 9 months – 2 years are now eligible for 30 hours free childcare from April 2024.
Returnships skills programmes for the over 50s.
£406 million and Workwell partnerships to tackle health conditions that cause workers to drop out of the workforce
We are no longer expected to experience a technical recession due in part to action taken as part of the Spring Budget 2023
Universal support scheme to help disabled and long-term sick back into work.
There will be £80m in 12 UK locations to “supercharge” the growth in hi-tech with 4 key sectors of focus.
Internships will see an extra £3 million investment with other measures put in place to support young people entering the workforce.
Full Expensing for the next 3 years is designed to boost business investment, effectively cutting business tax by £9 billion per year.
The government is working to introduce better right to employees to ask for flexible working from day one as part of the Private Members Bill.
Legislation will be introduced in Spring Finance Bill 2023 to charge corporation tax and set the main rate at 25% and the small profits rate at 19% for the financial year beginning 1 April 2024.

Now for more detail behind each one…

Pensions Lifetime Allowance

The pension measures look to tackle early retirement.

Pensions Annual Allowance will increase to £60,000 from April 2023 up from £40,000. This tax relief measure encourages skilled high earners to stay in the workplace instead of taking early retirement. As a result, 80% of NHS doctors will not receive a tax charge. Over 333,000 healthcare workers left their jobs in 2021.
Pensions Lifetime Allowance will be removed from April 2023 then abolished entirely in April 2024, removing disincentives to working for longer. This will also simplify the tax system. The PLA cap is currently £1,073,100.
Top up payments – Tax years 2024-2025 onwards will see top-up payments to individuals with a total income below the personal allowance saving into a pension scheme using a net pay arrangement. This better aligns top-up outcomes with equivalent savers saving into pensions schemes using Relief at Source. This will take effect from 6th April 2025.
Collective money purchase (CMP) winding up – The government, in Spring Finance Bill 2023, will clarify the tax treatment on transfers, periodic income and the valuation of dependant pension benefits during the wind-up of a CMP scheme. The measure will occur from Royal Assent of Spring Finance Bill 2023.
New considerations for annual allowance charges – Open and closed public service pension schemes, for a given workforce, is being considered. This would allow members to use linking to offset any negative real growth for Annual Allowance purposes. These are expected to apply from the April 2023 tax year.

Childcare and Wraparound Support Extended

1- to 2-year-olds will now receive free 30 hours childcare (as well as children over 9 months) which will be rolled out in stages from April 2024. This will apply weekly for 38 weeks per year. This is a huge boost for parents who thus far have only been eligible for this benefit once their child turns 3.

This could have a positive knock-on effect for the gender pay gap and the lifetime earnings of working women with children. There are 435,000 parents in England with children under 3 who are inactive due to parenting and this move is expected to have a big effect on the gender pay gap.

There will also be additional measures so parents of school age can drop their children between 8am-6pm. Many parents disrupt their work to commit to the school runs and see parental burnout and stress from trying to balance work and home life.

UC claimants moving into work or increasing their hours will receive their childcare costs upfront. There are currently 5.9 million Universal Credit claimants. Whilst removing some of these barriers to work for UC claimants is encouraging there is debate over the widening of the sanction scheme.

Supporting the over 50s

Returnships is a new programme and the older generation’s answer to the current skills programmes.

This scheme for over 50s will make skills programmes more accessible to the ageing population. There will also be a midlife MOT offer, expected to reach 40,000 people each year.

There has been a surge in early retirement since the pandemic which is driving the drop in economic activity with 565,000 fewer people classed as economically active than at the start of 2020.

Older women are also suffering from age disparity with unemployed women over 65 tripling between 2020 and 2021. There has been a 320,000 increase in inactive 50-64 year olds.

WorkWell and health in the workplace

A pilot will see integrated work and health hubs introduced in England to reduce the risk of people falling out of workforce due to health conditions.

£406 million will be invested in the plan to tackle the main health causes keeping people out of work especially around mental health, cardiovascular and musculoskeletal conditions. Mental health support will be digitised further to help with accessibility.

What Recession?

Great news, we are no longer expected to experience a technical recession. This is partially down to the planned measures in the Spring Budget.

And it’s good news for inflation too. The OBR reports that whilst inflation was 10.7% in the final quarter of last year (after peaking at 11.1% in Oct 2022) this will fall to 2.9% by the end of 2023.

This will be music to the ears of employers across the UK concerned about buyer patterns and employee retention.

Disabled and Long-Term Sickness Return-To-Work Support

A new voluntary employment scheme has been designed for disabled people and those with healthcare conditions. There will be a £4,000 spend per eligible person to help them find a role that suits their needs with 50,000 places supported once the rollout is complete.

This voluntary ‘Universal Support’ scheme will pear individuals within England and Wales who want to work in existing job vacancies. Providing funding both for training and workplace support.

One of the biggest disability benefit shake ups in over a decade includes removing the Work Capability Assessment, meaning most claimants will only have to complete one health assessment. Importantly this helps people progress towards or enter work without “the worry of being reassessed and losing their benefits.”

Long-term sickness accounted for 28% of total inactivity at the end of 2023. 500,000 more people since the pandemic are off work with long-term sickness taking the total to 2.5 million. This includes the effects of long covid and long hospital waiting times are likely to be a contributor too.

6.7 million of the working age population are economically inactive with the exclusion of students.

Sectors to watch

The government shines a spotlight on green industries, digital tech, life sciences, creative industries and advanced manufacturing backed up by investment.

There will be £80m in 12 UK locations to “supercharge” the growth in hi-tech.

In R&D tax credits news there will be a £500 million package annually to support 20,000 R&D intensive businesses.

There are also creative sector tax reliefs for theatres, museums, orchestras and galleries with an extra layer of protection.

Help for young workers

As well as supporting the ageing population young people will see help too.

Internships will get an extra £3 million investment.

There are also other measures to help encourage young people claiming UC to move into work and support for those moving from residential care into work as young adults.

Full Expensing and Innovation

Full Expensing for the next 3 years is designed to boost business investment, A business tax cut of £9 billion per year effectively.

The forecast by OBR predicts that this will increase business investment by 3% annually. It is hoped this move will become permanent and includes equipment for factories, IT equipment and machinery.

In addition to pro-innovation regulations of digital tech £900 million of funding is being included for an AI research resource along with an exascale computer. As the UK boasts of being one of only a few companies to have one with £2.5 billion ten-year quantum research.

Flexible working the one to watch

The government wants to introduce better rights for employees, allowing them to ask for flexible working from day one as part of the Private Members Bill, with flexible working research set to conclude earlier than planned with a call-to-evidence in the Summer of 2023.

Corporation tax rates

Legislation in the Spring Finance Bill 2023 will charge corporation tax and set the main rate at 25%, with 19% as the small profits rate, beginning 1 April 2024 for that financial year.

Autumn Budget Recap

Here’s a revisit of the autumn announcements.

Read the full recap of the Autumn Budger here

NI changes – Summer 2022 saw National Insurance Contributions (NICs) rise in July from £9,880 to £12,570 with the Health and Social Care Levy reversed in November 2022 saving just under 30 million workers an average of £480 during 2023-2024
National Living Wage – Increases from 2023 onwards
Income Tax fixed until April 2028
Electric vehicle owners see VED changes from April 2025

Company Car Tax rate is set till April 2028
Tax reductions for married & blind people.
In-Work Conditionality for UC claimants
Made Smarter Adoption boost in the East Midlands
Measures to open the competition up in the digital space.

Tarriffs removed for UK producers on 100+ goods over 24 months.

“In the face of enormous challenges, I report today on a British economy which is proving the doubters wrong.” Jeremy Hunt, 15th March 2023, Spring Budget Speech

Read the full spring budget announcement from Gov.UK