15 Mar Spring Budget 2023
Spring Budget 2023: Our Review
Following the poorly received September mini-budget 2022 from the fleeting Kwasi Kwarteng, we watched as Chancellor Jeremy Hunt delivered his second major fiscal statement on Wednesday, 15th March. Promising to halve inflation and strengthen the economy whilst also reducing debt across the UK, we all eagerly anticipated his Spring Statement 2023. But was it everything we expected? Did our predictions match our observations?
Along with a promise that the UK will not enter a technical recession this year, here are the key points we took away from the Spring Budget 2023:
Cost of Living
In the early hours of the morning, Mr Hunt teased us with a taste before the main event, announcing before the budget that he would be extending the energy bill support for another three months. After many urged the Chancellor to postpone the 20% rise, it seems the Government listened and acted. Until the end of June, the Energy Price Guarantee is set to remain at £2,500 a year for typical households, saving the average family £160. Undoubtedly, this will relieve some pressure households currently face with the cost of living.
But will it be enough?
During the Spring Budget, the Chancellor also recognised the pressure concerning over 4 million households in the UK and declared that the Government will be ending the prepayment meter premium. This will bring charges for comparable direct debit in line and save on average £45 a year for those households.
Another U-turn was announced – This year’s planned increase of 11p in fuel duty will be cancelled, and rates will be frozen for the next 12 months. Furthermore, Jeremy Hunt confirmed duty on draught beer will be frozen. The Brexit Pubs Guarantee will help not only the consumer’s pockets but also the hospitality sector.
Corporation Tax Rises
Mr Hunt ignored warnings from business owners and confirmed he is pushing forward with a rise in corporation tax effect from April 2023. The corporation tax will increase from 19% to 25% in the new tax year on profits over £50,000. In response to this, we believe reviewing “benefit extraction” strategies will be necessary – the relative merits of dividends, salary, and bonuses.
Back To Work
Economic inactivity has indeed been increasing in the UK. At Eight Wealth Management, we have helped many of you on your journey to achieve financial freedom and enjoy life in early retirement. In the table below you can see that rising inactivity amongst 50-to-64-year-olds accounted for 68.5% of the total rise in economic inactivity. (1)
Source: ONS, A05: Economic inactivity by age group (seasonally adjusted), 14 March 2023
Therefore, as part of the next steps to drive economic growth across the UK, Mr Hunt attempted with flattery, when trying to encourage the ‘experienced’ workers to extend their working lives with these key steps:
- Enhancing the Department for Work and Pensions “midlife MOT”
- ‘Returnaships’ – a new and more appealing apprenticeship scheme for older and ‘experienced’ workers
Pensions
The attempt at flattery could persuade many to reassess their financial and retirement journey, as Jeremy Hunt unveiled generous pension tax changes.
There had been speculation the Chancellor would increase the pension Lifetime Allowance from £1m to £1.8m. However, the Lifetime Allowance charge will be removed from April 2023, and abolished entirely from April 2024. Additional restrictions are being applied with regard to tax-free cash, which will be limited to 25% of the current Lifetime Allowance (£268,275), although those with higher historic protections could be entitled to more.
Furthermore, the pension tax-free Annual Allowance will be raised from £40,000 to £60,000pa. This flows through to those that were limited by the tapered annual allowance to mean that even high earners will be able to contribute that bit more, with the minimum tapered amount being increased from £4,000 to £10,000.
These changes are likely to be welcomed by those wishing to stay working and contribute to their pension plans for longer.
If you are concerned or feel as though you may be affected by the Chancellor’s Spring Statement, please get in touch with your servicing partner or a member of the team, and we will be happy to help. We can help you ensure your financial plans stay on the right path.
If you would like to read the Spring Budget 2023 in full from SJP, please click here.
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SJP Approved 16/3/2023