Chancellor Jeremy Hunt stated in his Spring Budget announcement on 15 March 2023, that the UK is expected to avoid a technical recession in 2023 and that inflation is projected to decrease to 2.9% by year’s end (currently at 10.1%).
According to Hunt, “high inflation is the root cause” of the strike action that is currently affecting numerous UK industries, with UK Hospitality stating concerns that the hospitality industry could lose up to £600 million as a result of the nationwide rail and tube strikes happening in March and April.
Here is a brief summary of the Spring Budget announcements affecting the hospitality industry:
- Wine taxes will rise by up to 50p per bottle beginning in August, but draught beer duty will be up to 11p lower than in supermarkets.
- The annual tax-free allowance for pensions will increase from £40,000 to £60,000, and the Lifetime Allowance, which previously had a cap of £1.07 million on how much an employee could accumulate in pensions over their lifetime, will be abolished.
- Corporation tax payments made by businesses on taxable profits over £250,000 will increase from 19% to 25% starting in April.
- The Annual Investment Allowance for small businesses has risen significantly to £1 million. Hunt said that 99% of all businesses will be able to deduct the full value of all their investments in IT equipment, plant, or machinery from their taxable profits for that year. Investing in capital equipment will allow businesses to reduce their tax charges at 25% over the next 3 years.
- From April 2024, 30 hours of free weekly childcare will be extended to children under the age of three. It will eventually cover all children beginning at the age of nine months, with implementation scheduled for September 2024. It will only apply to households where both parents work, and only during the school year (38 weeks of the year).
- A new “Returnerships” skills offer will be given to over-50s looking to return to the workforce in a new industry, and a voluntary employment programme for disabled people will fund 50,000 job placements annually at a cost of £4,000 per person.
- Up until the end of June, the Energy Price Guarantee, which caps monthly household bills at £2,500, will remain in effect. While this does not apply to businesses, it may result in increased consumer spending if consumers’ pockets are protected until energy prices fall.
Marcus Jones, Managing Director, Capcon Ltd, comments on the Chancellor’s announcement and the impact on the hospitality sector:
“The hospitality sector has the potential to boost the economy, create jobs, and raise money through taxes. However, without the proper environment for growth, companies are more likely to shut down because of high business rates, unaffordable tax bills, and a staffing shortage.
“In the upcoming months, temporary financial assistance with energy costs might help keep the doors open, but it seems unlikely that things will go back to how they were before the pandemic.
“We can only hope that more can be done to assist companies affected by cost increases and that local pubs, bars, and restaurants will continue to enjoy the patronage of their local communities.”
If you have any concerns or queries relating to the Spring Budget announcements and how the measures affect you and your business, please contact Matthew Burge, Hospitality Partner at Beavis Morgan, accountants, tax, restructuring and business advisory experts.