Spring Budget 2023 Summary
Chris Broome – Chartered Financial Planner
- Cap on amount workers can accumulate in pensions savings over their lifetime before having to pay extra tax (currently £1.07m) to be abolished.
- Maximum Pension Commencement Lump Sum without protection capped at £268,275.
- Tax-free yearly allowance for pension pot to rise from £40,000 to £60,000 – having been frozen for nine years.
- Increased money purchase annual allowance from £4,000 to £10,000.
- Adjusted income threshold for Tapered Annual Allowance increased from £240,000 to £260,000.
- The triple lock on the State Pension is maintained, guaranteeing the 10.1% CPI-based increase for next April along with the same level of increase to the Pension Credit.
- There has been an ongoing review of State Pension age and whether the current timetable for changes is still appropriate. The Government have said they will publish their response by May this year.
- Rates – Income tax rates for 2023/24 will remain at the basic, higher and additional rates of 20%, 40% and 45% respectively.
- Allowances and thresholds – The point at which additional rate tax becomes payable will be cut from £150,000 to £125,140 from 6 April 2023. This will mean that those already paying tax at 45% will pay an extra £1,243 in 2023/24. The Government forecast that approximately 250,000 individuals will pay some extra tax due to this measure.
The personal allowance and basic rate band will be £12,570 and £37,700 respectively and are to remain frozen until April 2028. This means that the higher rate tax threshold will remain at £50,270 for those entitled to a full personal allowance.
- Dividends – The dividend allowance is to be halved from £2,000 to £1,000 for 2023/24, and halved again to £500 for 2024/25. Consequently, many more investors will need to complete tax returns if their dividend income exceeds £1,000 next year. The dividend tax rates for basic rate, higher rate and additional rate taxpayers will remain at 8.75%, 33.75% and 39.35% for 2023/24.
- NI thresholds will be fixed at the current 2022/23 levels. The changes to the thresholds at which individuals (both employed and self-employed) start to pay NI, introduced in July 2022, will remain – i.e. they’re kept in line with the annual personal allowance of £12,570.
Capital Gains Tax
- The CGT annual exemption will be cut from £12,300 to £6,000 from April 2023, and to £3,000 from April 2024. Consequently, based on 2021/22 figures, an estimated extra 235,000 individuals will need to file a self-assessment return in 2023/24.
- The rates of CGT will continue at 10% for gains falling in the basic rate band when added to income, and 20% for gains exceeding the higher rate threshold (18% and 28% respectively for gains on residential property).
- The nil rate band (NRB) and residence nil rate band (RNRB) will remain at £325,000 and £175,000 until April 2028.
- Main rate of corporation tax, paid by businesses on taxable profits over £250,000, confirmed to increase from 19% to 25%.
- Companies with profits between £50,000 and £250,000 to pay between 19% and 25%.
- Companies able to deduct investment in new machinery and technology to lower their taxable profits.
- Tax breaks and other benefits for 12 new Investment Zones across the UK, funded by £80m each over the next five years.
- Reduced paperwork for international traders, who will also be given longer to submit customs forms under streamlined rules.
- Office for Budget Responsibility predicts the UK will avoid recession in 2023, but the economy will shrink by 0.2%.
- Growth of 1.8% predicted for next year, with 2.5% in 2025 and 2.1% in 2026.
- UK’s inflation rate predicted to fall to 2.9% by the end of this year, down from 10.7% in the last three months of 2022.
- Underlying debt forecast to be 92.4% of GDP this year, rising to 93.7% in 2024.
- 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.
- Families on universal credit to receive childcare support up front instead of in arrears, with the £646-a-month per child cap raised to £951.
- £600 “incentive payments” for those becoming childminders, and relaxed rules in England to let childminders look after more children.
- New fitness-to-work testing regime to qualify for health-related benefits.
- New voluntary employment scheme for disabled people in England and Wales, called Universal Support.
- Tougher requirements to look for work and increased job support for lead child carers on universal credit.
- £63m for programmes to encourage retirees over 50 back to work, “returnerships” and skills boot camps.
- Immigration rules to be relaxed for five roles in construction sector, to ease labour shortages.
Please get in touch if you have any questions about what the Budget means for you or your financial plans.
Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.