Only half a year ago, Kwasi Kwarteng presented his contentious “mini-Budget” in the House of Commons. The repercussions of this announcement caused the Truss government to fall, and the current Chancellor, Jeremy Hunt, introduced a set of policy measures in November 2022 to stabilize the markets. With the objective of promoting growth, the Chancellor has now revealed the next phase of his plan, which follows his difficult decisions to achieve stability and sound finances. Continue reading to learn about the winners and losers from the 2023 spring budget.
Winners of the 2023 Spring Budget
Over 50s returning to work
In his speech, the Chancellor said that “older people are the most skilled and experienced people we have”. So, he announced steps to make it easier for those over 50 to work for longer. To this end, the government aims to strengthen the “midlife MOT” program, which offers evaluations to assess individuals’ financial and well-being status to help prepare for a more secure retirement.
Additionally, the Chancellor introduced a “returnership” apprenticeship scheme tailored to individuals aged 50 and above who desire to re-enter the workforce. Furthermore, the government plans to implement significant pension reforms aimed at promoting and supporting more over-50s to stay or return to work. This brings us to…
Pension savers
An individual’s tax-efficient pension savings are limited by the Lifetime Allowance (LTA), which has been fixed at £1,073,100 since 2020 after reaching its peak in 2012. To encourage people to continue working and avoid tax charges for exceeding the lifetime limit, the Chancellor has decided to abolish the LTA. From April 2023, the government will eliminate the LTA tax charge, and the complete abolition will be included in a forthcoming Finance Bill.
In April 2023, the Annual Allowance will increase from £40,000 to £60,000, allowing pension savers to save more tax-efficiently in any given year. They can also carry forward unused Annual Allowances from the previous three tax years. The Tapered Annual Allowance impacts many high earners, and its minimum amount will rise from £4,000 to £10,000 from April 6, 2023. The adjusted income threshold will also be increased from £240,000 to £260,000 from the same date.
These are major steps that will allow pension savers to accumulate significantly more tax-efficient pension savings over their lifetime, and reduce some tax disincentives to work. In addition, once an individual flexibly accesses their defined contribution pension savings, the total tax-relieved pension savings they can make each year is restricted to the level of the Money Purchase Annual Allowance (MPAA).
After flexibly accessing their defined contribution pension savings, an individual’s total tax-relieved pension savings are limited to the Money Purchase Annual Allowance (MPAA). From April 2023, the MPAA will increase to £10,000 to support those returning to the workforce or building up their retirement savings.
Parents with young children
In what is likely to be a key battleground ahead of the next election, the Chancellor announced an expansion of free childcare.
Parents of children aged between nine months and four years will have access to 30 hours of free childcare each week, along with subsidised childcare for parents on Universal Credit. The support will be phased in, with every eligible working parent of an under-five receiving this assistance by September 2025.
Households with high energy bills
In November, the government’s Energy Price Guarantee was extended until April 2023, allowing households to pay energy bills of around £2,500 a year. The Chancellor has now announced a further extension of three months to keep bills at the same level, saving families an additional £160 on top of other energy support measures already introduced.
Drivers
The Chancellor has decided against uprating fuel duty with inflation or increasing the duty due to the high inflation rates. Instead, he has extended the 5p cut in fuel duty for a year, which will save the average driver £100 in addition to the £100 already saved since last year’s cut. Furthermore, the “potholes fund” will receive an additional £200 million, bringing the total annual allocation to £700 million, which is expected to fix up to 4 million more potholes.
Swimmers
In addition to the 2023 spring budget, the Chancellor has raised concerns about the increasing expenses associated with the upkeep of community facilities such as swimming pools. As a solution, he has introduced a fund of £63 million to provide aid for public leisure centres and pools.
Pubgoers
The Chancellor, Hunt, introduced a measure aimed at benefitting pubgoers called the “Brexit pubs guarantee”. Under this initiative, from 1 August, the relief on draught beer served in pubs will be up to 11p lower than that for supermarket beer, while duty rates for all alcoholic beverages produced or imported to the UK will increase in line with inflation. The Chancellor emphasized that while British ale might be served warm, the duty on a pint of it is frozen.
Losers of the 2023 Spring Budget
Businesses with larger profits
In 2021, former Chancellor Rishi Sunak announced that Corporation Tax would increase in April 2023 for businesses with profits exceeding £250,000. The Budget has confirmed that this increase will proceed as planned, affecting around 10% of companies paying the top rate. Meanwhile, companies with profits less than £50,000 will continue to pay Corporation Tax at 19%. However, businesses will be able to offset 100% of their UK investment in IT equipment, plant, and machinery against profits to reduce their tax bills. This move is equivalent to a £9 billion per year cut to Corporation Tax, and the government aims to make the scheme permanent in due course.
Taxpayers
The Chancellor announced in his November statement that the Income Tax additional rate threshold would be reduced from £150,000 to £125,140, which would result in higher taxes for those on high incomes.
He also stated that the thresholds for Income tax, National Insurance, and Inheritance Tax (IHT) would remain unchanged until April 2028, implying that many individuals would end up paying more Income Tax over the next five years due to the rise in earnings that would push them into a higher tax bracket. As a result of the increase in house prices and asset values, it is probable that more estates will incur an IHT liability in the coming years.
Savers
While it may now be possible to contribute more to your pension tax-efficiently, the subscription limits for tax-efficient ISAs were frozen at:
- £20,000 for an adult ISA
- £9,000 for a Junior ISA.
Smokers
The Treasury has stated in the Budget document that from 6 pm on Budget day, the duty rates on all tobacco products will rise by RPI plus 2%. The duty rate on hand-rolling tobacco will increase by RPI plus 6%, and the minimum excise tax will rise by RPI plus 3% this year.
All information is from the 2023 spring budget document and the government’s spring budget bulletin.
Get in touch
If you have any questions about whether you are a winner or a loser from the 2023 spring budget, and how it will affect you and your finances, please get in touch.
The content of this 2023 spring budget summary is intended for general information purposes only. The content should not be relied upon in its entirety and shall not be deemed to be or constitute advice.
While we believe this interpretation to be correct, it cannot be guaranteed and we cannot accept any responsibility for any action taken or refrained from being taken as a result of the information contained within this summary. Please obtain professional advice before entering into or altering any new arrangement.
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