On Wednesday 15th of March, Chancellor Jeremy Hunt presented his Spring Budget 2023. Hunt delivered his first official budget, outlining the government’s plans to cut inflation and improve economic growth in line with projections from the Office for Budget Responsibility (OBR).
“Despite continuing global instability, the OBR report today that inflation in the UK will fall from 10.7% in the final quarter of last year to 2.9% by the end of 2023.”
Opening his Spring Budget 2023 speech, Hunt admitted that the government “took difficult decisions to deliver stability and sound money”.
Today, he promised “a budget for growth”.
“Not just growth from emerging out of a downturn. But long-term, sustainable, healthy growth that pays for our NHS and schools, finds good jobs for young people, provides a safety net for older people […] all whilst making our country one of the most prosperous in the world.”
Here are some of the key points from the Spring Budget 2023 and how they may impact you.
Encouraging early retirees to return to the workforce
Jeremy Hunt’s Spring Budget 2023 is focused on getting Britain working again. Nearly 7 million working-age adults are classified as “economically inactive”, and more than a million of those have taken early retirement.
In an attempt to remove barriers for older workers, the chancellor has announced increased pension allowances and abolished lifetime limits.
Pensions Lifetime Allowance abolished in Spring Budget 2023
As a result of discussions with senior doctors in the NHS and other experienced professionals, the pensions Lifetime Allowance (LTA) has been abolished.
You can accrue a certain amount of tax-efficient pension savings during your lifetime. This is called the lifetime allowance and includes the total value of all pensions you’re entitled to: including contributions, employer contributions from any workplace scheme linked to that pension fund (if there are any), tax relief on those payments and investment returns.
Due to the Spring Budget 2023, from April, you will be free to amass as much tax-efficient pension savings as you like.
Pensions Annual Allowance increased in Spring Budget 2023
From 6 April 2023, the Chancellor announced that he would raise the Annual Allowance from its current limit of £40,000 to £60,000 per year.
The Annual Allowance is the maximum amount you can put into your pension each tax year (6 April to 5 April) and still be able to receive tax relief. In 2023/24, this will be increased from £40,000 per annum to £60,000.
Money Purchase Annual Allowance to increase
In another attempt to incentivize experienced people to return to work, the Chancellor announced an increase in the Money Purchase Annual Allowance.
The MPAA places a cap on the amount of money you can save tax-efficiently into your pension once you start drawing flexible income from your defined contribution pension savings.
The MPAA will increase from £4,000 to £10,000 from April 2023.
Tapered Annual Allowance to increase
The Minimum Tapered Annual Allowance will increase from April 2023, increasing the minimum annual pension payment for a retired member by £4,000 to £10,000. The adjusted income threshold for the Tapered Annual Allowance will rise from £240,000 to £260,000 on 6 April 2023.
These announcements have increased the amount people can put aside for their pensions
In abolishing the LTA and increasing the Annual Allowance, MPAA, and Tapered Annual Allowance the Spring Budget 2023 has therefore increased the amount people can put aside for their pensions each year and save over their lifetime, all while minimising tax. The hope is that this will also dissuade people from retiring early.
Savers and investors see key subscription limits frozen in Spring Budget 2023
The annual subscription limit for adult ISAs will remain at £20,000.
Junior Individual Savings Accounts (JISA) and Child Trust Fund accounts will also remain static at £9,000.
The government will make no changes to its planned Corporate Tax rises, but has introduced a new initiative that encourages investment in the Spring Budget 2023.
In acknowledgement of the increase in Corporation Tax, which has become effective from April 2023 and will go up from 19% to 25%, Hunt announced that businesses can now offset 100% of their investments in infrastructure and equipment against profits for tax purposes.
Businesses with profits exceeding £250,000 will be hit hard by this tax increase. The marginal relief will apply to companies with profits between £50,000 and £250,000.
For those with profits of less than £50,000 there is no change. They will continue to pay Corporation Tax at 19%.
Spring Budget 2023 plans for business growth
The UK Treasury has announced a plan to stimulate the country’s sluggish economic growth by investing up to £80 million each in 12 regional investment zones over five years. The money can be used to reduce taxes, provide training and upgrade infrastructure.
Eight locations in England have been selected as possible sites for investment zones. These are:
- East Midlands
- Greater Manchester
- Liverpool
- North East
- South Yorkshire
- Tees Valley
- West Midlands
- West Yorkshire
A further four zones will sit across Scotland, Wales and Northern Ireland.
Energy price guarantee extended
The government has extended the energy price guarantee that limits a typical household’s annual bill to £2,500.
The EPG had been due to change in April to £3,000, but now the current level will remain for a further three months. Hunt said: “This temporary change will bridge the gap and ease the pressure on families, while also helping to lower inflation too.”
The chancellor added, “This measure will save the average family a further £160 on top of the energy support measures already announced.”
Fuel duty
The Chancellor announced that he would extend the temporary 5p fuel duty for another 12 months, to offset the volatile petrol and diesel prices.
“That saves the average driver £100 next year and around £200 since the 5p cut was introduced,” Jeremy Hunt said.
This one-year extension will cost £6 billion.
Draught Relief
In good news for beer drinkers, Hunt announced that he would “significantly increase the generosity of Draught Relief”. From 1 August, the duty on draught products in pubs will be up to 11p cheaper than that charged for the same drinks in supermarkets.
As the chancellor said, “British ale may be warm, but the duty on a pint is frozen.”
Get in touch
If you have any questions about how the Spring Budget 2023 will affect you and your finances, please get in touch.
All information is from the Spring Budget 2023 document and the government’s Spring Budget bulletin.
The content of this 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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