In the past 6 months there have been three budgets (all with different titles) and all with varying impacts on the economy and markets. The latest is by contrast a mixture of the previous two, some give aways and some fiscal tightening with a view on winning over the electorate at the next election.
In this budget, the Chancellor has been given some manoeuvrability, energy prices have dropped significantly since last Autumn and given that the economy is set to avoid a technical recession (two consecutive quarters of decline in Gross Domestic Product), more money can be allocated to other departments and projects.
Furthermore, if the Office of Budget Responsibility has got their sums right, inflation which has been a big thorn in both the public’s and Government’s side, is set to fall dramatically to 2.9% by the end of the year which will be very welcome news to many.
The big changes announced are to the pension allowances which will affect many of you. The emphasis on the changes in to entice those who retired over the past few years, back to work with more favourable benefits to make it worthwhile. Also to allow individuals to pay more into their pensions, particularly the self employed and those limited by the current rules.
The Energy Price Guarantee is set to be extended until July, with the wholesale gas price continuing to fall, this has left the Government with extra funds in order to keep this going a little longer when the warmer weather will naturally reduce energy bills.
Taking all this into consideration, the Chancellor has provided some surprises in this budget and its’ not all doom and gloom as we heard in the last one. Whilst a lot of the changes or announcements were made in the autumn statement we have recapped on the changes which will affect you all.
No changes for income tax or personal allowances. Below is a table to reflect the changes from April 2023 for England, Wales and Northern Ireland.
| Tax Band | Current Income Threshold | From April 2023 Income Threshold | Tax Rate |
| Personal Allowance | First £12,570 earned | Frozen until 2028 | 0% |
| Basic Rate | £12,571 to £50,270 | Frozen until 2028 | 20% |
| Higher Rate | £50,271 to £150,000 | £50,271 to £125,140 | 40% |
| Additional Rate | Over £150,000 | Over £125,140 | 45% |
Taking the above figures into account this means that someone on the average UK salary of £33,000 will pay almost £2,557 more income tax between now and 2028.
For those of you who have your own business there is the increase in corporation tax from 19% to a lofty 25% (on profits in excess of £250,000) from 1st April 2023.
The Inheritance Tax (IHT) main bands – Nil-Rate Band (£325,000) and Residence Nil-Rate band (£175,000) will remain frozen until April 2028. According to Office of Budget Responsibility (OBR) a move which is estimated to net more than an additional £1 billion for government by the 2027/28 tax year.
Below is an outline of the main points of the budget.
- Annual Pension Allowance, this is to be increased from £40,000 to £60,000 from 6th April this year.
- Pension Lifetime Allowance will be abolished, it currently stands at £1,073,000. Those with total pension pots in excess of the current figure will now not face the potential of additional tax on drawing down from them.
- Money Purchase Annual Allowance, this is to increase from £4,000 to £10,000 from April this year. This is the amount of contribution that can be made into a pension once they have commenced taking income form their pension scheme. This is designed to attract those who may be considering coming out of retirement and back into employment where they boost their retirement provisions.
- 30 hours of free childcare for working parents in England expanded to cover one and two-year-olds, to be rolled out in stages from April 2024.
- The annual exemption amount for CGT will be cut from £12,300 to £6,000 next year and then to £3,000 from April 2024;
- The annual savings allowance from 6th April 2023:
Basic rate taxpayers (20%) can earn £1,000 (£500 from April 2024) in tax-free interest each year
Higher rate taxpayers (40%) can earn £500 (£250 from April 2024) in tax-free interest each year
Additional rate taxpayers (45%) don’t get an allowance – No change
- The dividend allowance currently £2,000 will be reduced from April 2023 to £1,000, then will half to £500 from April 2024.
- It is important to note that the CGT allowance, annual savings allowance and the dividend allowance do not effect cash or stocks and shares ISAs they remain tax free.
- ISA allowances will remain the same, £20,000 and £9,000 for junior ISAs (under 18)
- From April 2025,electric cars will no longer be exempt from Vehicle Excise Duty;
- While the employers’ national insurance contributions threshold is frozen until April 2028, the employment allowance will be retained at its new, higher level of £5,000 until March 2026;
- The Energy Price Guarantee will remain in place until July, giving the typical household a bill of £2,500 per year.
- Lastly the planned increases on fuel and alcohol have been frozen, so there is something to drink to.
This budget was always going to be softer than the last, with an election looming this budget had to appeal to the electorate, it was deemed a budget for growth. However, it will be a while before we see if the measures do enough to bring back sustainable growth as many of the announcements will not be implemented for a while, so for now the jury is out.
As always if you have any questions, queries or concerns then please contact us and we will be happy to discuss.