While the headlines from yesterday's Budget have certainly been less dramatic than we saw six months ago, the detail that came in the Chancellor's announcement is no less impactful.
The Office for Budget Responsibility have optimistically predicted that the UK inflation rate will fall to 2.9% by the end of the year and the UK will not enter recession, with the rate currently at 8.8% as of January 2023.
The biggest changes seen in the budget were those surrounding pension savings rules, as part of the Chancellors plan to encourage those who had retired early back into the workforce and also support doctors who were considering early retirement due to pension legislation.
Those changes were:
- Abolishment of the Lifetime Allowance (LTA) charge on pensions (previously £1,073,100)
- Increase of the pension Annual Allowance (maximum amount an individual can contribute to their pension each year) from £40,000 to £60,000
- Increase of the ‘adjusted income’ tapering level from £240,000 to £260,000
- Increase of the minimum floor for pension tapering from £4,000 to £10,000
- Increase of the maximum pension contributions for those who have triggered the Money Purchase Annual Allowance (taken taxable income from their pension) from £4,000 to £10,000
These will all come into effect from April 2023.
These changes will have a big impact on those with or approaching what was previously an LTA issue and subsequently we will be reaching out directly to those clients to discuss how this will affect their planning. The rules around pensions are very complex so should you wish to discuss this with your adviser please get in contact with us.
The other main announcements from the Chancellor included:
Businesses
- Confirmation of the increase of Corporation Tax to 25% from April 2023
- Replacement of the super-deduction scheme with full expensing for qualifying investments until April 2026
- Bolstering of support for Research and Development focussed small to medium sized businesses
- 12 Investment zones across the UK have been identified to receive funding to “level up”
- Increased reliefs for the creative industry to encourage further growth
Indirect Taxes & Duties
- Fuel and alcohol duties are to be frozen, with the exception of draught alcohol products
Energy support
- Energy Price Guarantee will remain in place for a further 3 months to limit household energy bills
- Non-domestic support, the Energy Bills Relief Scheme, will be replaced with Energy Bills Discount Scheme
Childcare support
- Expansion of free childcare for parents earning less than £100,000, to be phased in by September 2025
- Proposing an increase of the hourly funding rate for those supplying free childcare
- Increase of the child to carer ratio to 5:1
In the coming weeks, Niche Commercial Director, Aled Phillips, will be taking a more in-depth look at the market reactions to the Budget and the impact on clients. However, in the mean time, if you have any questions about your financial plan, please don't hesitate to contact your adviser.
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The contents of this article do not constitute financial advice in any way; if you have any concerns about your finances you should talk to your financial adviser. The value of your investments can go down as well as up.
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