Back to work

Major themes in the Budget were getting people to enter work, increase their working hours and extend their working lives. These include numerous proposals detailed below.

Childcare

Working parents in England will be able to access 30 hours of free childcare per week, for 38 weeks of the year, from when their child is nine-months old to when they start school.

This will be rolled out in stages:

• From April 2024, all working parents of two-year-olds can access 15 hours per week.
• From September 2024, all working parents of children aged nine months up to three-years old can access 15 hours per week.
• From September 2025 all working parents of children aged nine months up to three-years old can access 30 hours free childcare per week.

Where parents need childcare for more than 38 weeks a year, they are able to spread their free hours entitlement over a higher number of weeks.

The government will substantially uplift the hourly rate paid to providers that deliver the existing free hours. It will also change the staff-to-child ratios for two-year-olds, moving from 1:4 to 1:5 and provide start-up grants for new childminders, including for those who choose to register with a childminder agency. Childminders who register with Ofsted will receive a start-up grant of £600, whereas those who register with a childminder agency will receive £1,200.

In addition, parents on Universal Credit childcare support will receive payment upfront when they are moving into work or increasing their hours, rather than in arrears. Also, the Universal Credit childcare cap will increase to £951 for one child (up from £646) and £1,630 for two children (up from £1,108).

Universal Credit claimants

Changes include:

• Increasing the Administrative Earnings Threshold, the minimum amount a person can earn without being asked to meet regularly with their Work Coach, from the equivalent of 15 to 18 hours of earnings at the National Living Wage.

Comment

These changes are expected to require over 100,000 additional claimants to meet more regularly with a Work Coach and take active steps to move into work or increase their earnings.

• Expanding work search requirements.

• Strengthening the application of the Universal Credit sanctions regime, including additional training for Jobcentre Work Coaches to ensure they are applying sanctions effectively, including for claimants who do not look for or take up employment.
• Extending the Youth Offer until 2028, which will support young people looking for work.

For disabled people and those with long-term health conditions

The government is introducing measures to further help those who are not working due to long-term sickness but want to, with a focus on cardiovascular disease, mental health and musculoskeletal conditions as the leading causes.

Employing older workers

Older workers will be supported to work for longer and to return to work via changes to the pension rules, access to an enhanced digital midlife MOT and an expansion of the Jobcentre Plus midlife MOT offer, which provides in-person financial planning and awareness sessions for Universal Credit claimants aged over 50.

VAT

The VAT registration and deregistration thresholds will not change for a further period of two years from 1 April 2024, staying at £85,000 and £83,000 respectively.

Comment

According to the government, at £85,000, the UK’s VAT registration threshold is more than twice as high as the EU and OECD averages.

Changes to VAT penalties and interest

The government announced pre-pandemic that it intended to change the way interest and penalties applied for VAT purposes. After a number of delays the new rules were implemented for VAT periods starting on or after 1 January 2023. The default surcharge was replaced by new penalties if a VAT return is submitted late or VAT is paid late. There are also changes to how VAT interest is calculated. The changes are as follows:

• VAT returns submitted late – late submission penalties will work on a points-based system. For each VAT return submitted late one penalty point will be imposed. Once a penalty threshold is reached, a £200 penalty will apply, with a further £200 penalty for each subsequent late submission.
• Late payment of VAT – the rate of penalty will depend on how late the payment is. However, to give businesses time to get used to the changes, HMRC will not be charging a first late payment penalty for the first year from 1 January 2023 until 31 December 2023, if the VAT is paid in full within 30 days of the payment due date.
• How late payment interest will be charged – for VAT periods starting on or after 1 January 2023, HMRC will charge late payment interest from the day the payment is overdue to the day the payment is made in full.
• Introduction of repayment interest – the repayment supplement was withdrawn from 1 January 2023. For VAT accounting periods starting on or after 1 January 2023, HMRC will pay repayment interest if they are late in making a refund.

Annual Tax on Enveloped Dwellings

The annual chargeable amounts will be uplifted by inflation for the 2023/24 charging period.

Plastic Packaging Tax

Plastic Packaging Tax was introduced on 1 April 2022 to encourage the use of recycled plastic in packaging and to divert plastic away from incineration or landfill. The rate will increase to £210.82 per tonne for all plastic packaging manufactured in the UK or imported into the UK on or after 1 April 2023.