Our guide to the 2023 Spring Budget offers a summary of the announcements that are most relevant for our clients, their families and their businesses.
This week Jeremy Hunt addressed a rowdy House of Commons to deliver his 2023 Spring Budget – with the stated aim of bringing people back into the workforce. Mr Hunt commented that the Office for Budget Responsibility (OBR) expects inflation to fall from 10.7% to 2.9% by the end of 2023, bringing us back to much more familiar territory. Despite this sharp fall in inflation and narrowly avoiding a recession, living standards are predicted to fall by 6% this year and next.
Lifetime Allowance Abolished – The Lifetime Allowance (LTA) for pensions savings will be abolished from April 2024, with the Lifetime Allowance tax charge being stopped from 6th April 2023 (effectively abolishing the LTA in all but legislation from this date). This is certainly very welcome and we look forward to sharing the personal impact of this change on your planning at our next meeting. The Lifetime Allowance is firmly baked-in to legislation and it is expected to take over 12 months to fully unwind the LTA rules from the wider pension legislation. It should be noted, that while the LTA is being removed, the standard cap on tax free pension commencement lump sums (typically 25%) will remain at a fixed rate of £268,275. Pension technicians are still unravelling exactly what this will mean for individuals who hold any form of LTA protection, such as Fixed Protection and Individual Protection. Our attention is very hot on this quickly changing area and we will be reaching out to impacted clients as soon as the outcomes are clear.
Annual Allowance Increased – The standard Annual Allowance for tax relievable pension savings is being increased from £40,000 to £60,000, from 6th April 2023. This is a welcome increase in the level of tax efficient pension contributions individuals can pay (and receive, such as from their employer) into their pensions. This makes personal pensions an even more attractive vehicle for retirement saving and a unique tool in estate planning.
Tapered Annual Allowance Increased – The Tapered Annual Allowance will increase from a minimum of £4,000 per tax year, to £10,000 (minimum), from 6th April 2023. The Annual Allowance ‘tapering’ will now affect individuals with an ‘adjusted income’ above £260,000 (up from £240,000), whereby they will receive a reduced Annual Allowance (starting from £60,000) of £1 for every £2 of ‘adjusted income’ they receive above £260,000. If you were previously subject to a tapered annual allowance, then chances are that you can now save more into pension.
Money Purchase Annual Allowance (MPAA) Increased – The MPAA is being increased from £4,000 per tax year, to £10,000. The MPAA affects anyone who has ‘flexibly’ withdrawn taxable income from a Money Purchase pension (such as a personal pension, group personal pension or SIPP). This is very welcome, as the previously tight limit of £4,000 seemed unfair and penalised those who returned to work or accessed pensions without advice.
Fuel Duty Frozen – Tax on fuel has been frozen for another year – with last years 5p cut maintained for another year. This should prevent a feared immediate jump in prices at the pumps!
Household Energy Bill Cap Extended by 3 months – We doubt you missed the announcement that the Government stepped in to ‘cap’ the ‘typical household’ (in reality, you will likely pay more or less than this ‘cap’) energy bill at £2,500, until April 2023 (when it was due to increase to £3,000). This ‘cap’ has now been extended to July 2023. From July, households will pay the lower of the Ofgem Price Cap or the Energy Price Guarantee (EPG), which will revert to £3,000 from July 2023 until the end of March 2024. Hopefully, as predicted by Cornwall Insight (but certainly not guaranteed!), the EPG may not be needed from July as the current prediction is for the Ofgem Price Cap to be below £2,500 in July and October 2023. Fingers firmly crossed – but a much-appreciated energy price decrease may be just around the corner!
Free childcare – The 30 hours a week was expanded to working parents to cover 9 month to 2 year-olds, but will only be fully implemented by September 2025
Draught Alcohol Relief – From 1 August 2023, the duty on draught alcohol products in pubs and will be up to 11p lower than the duty paid in supermarkets. A much needed boost for the ‘ale-ing’ pub industry (if you read this far, we’re sure you’ll excuse the pun!).
What does the Spring Budget mean for you?
Our guide to the Spring Budget gives a full breakdown of the chancellor’s tweaks and changes. Please take a moment to read our guide and reflect on the changes which may impact you and your family.
We have identified financial planning ‘threats and opportunities’ and will raise anything which may change your financial plan when we next meet. If there is anything in particular you you would like to discuss sooner, please contact your lead planner.
To download our full guide, click the image below:
