“Not blockbuster but can’t afford to be boring” – RSM UK’s predictions for the Spring Budget
RSM UK has said it expects the Spring Budget, which will be announced next week, will “not be blockbuster, but can’t afford to be boring”.
While a sharp fall in wholesale energy prices has meant to the cost of the energy price guarantee has been around half of what was expected, meaning government borrowing has been much lower than predicted by the Office for Budget Responsibility in November 2022, RSM expects the OBR to substantially downgrade its forecasts for the latter part of the forecast period.
This, in turn, will limit the Chancellor’s ability to increase spending while still meeting the target of reducing debt within five years.
RSM Partner Chris Etherington described Jeremy Hunt’s statement last year as the starter, stemming the fallout from previous Chancellor Kwasi Kwarteng’s mini-budget, with the Spring budget the main course. He said any sweeteners are likely to come in the future, targeting the next general election.
The firm expects the Chancellor to announce whether the government intend to merge tax reliefs for research and development into a single scheme as well as going into more detail on a domestic minimum top-up tax for large businesses to keep their effective minimum tax rate in the UK to at least 15 per cent.
Tax reliefs in the creative sector are likely to be on the agenda, such as the merging of the current TV and Film tax reliefs into a single scheme and restricting the availability of relief for European Economic Area expenditure for video games developers
The Chancellor is also expected to offer more detail on the proposed investment zones scheme, particularly on which areas of the UK are to be selected, and more information on the tax reliefs available for businesses in those areas.
Another area which is likely to see focus is tax rules affecting hybrid and distance working, following recent attention in this area. Tax on accommodation could see a review, with changes having been considered in this area as far back as 2016. Any changes to travel and subsistence tax relief would be the first since 1998.
In the past couple of years much has been said on getting over 50s either back into work or to remain in the workforce, and RSM expects announcements in this area including possible changes to National Insurance contributions and possibly even changing the personal tax allowance for workers of this age.
RSM Economist Thomas Pugh explained that there may be “a little bit of scope for short term giveaways, but not much scope in the longer term”.