We’ve worked with a number of our partners to compile a summary of the Spring Budget. In addition to this summary, a full analysis is available here.
Your Financial Planner will discuss any implications of these changes at your Annual Planning Meeting but if you have any pressing or urgent questions, then please get in touch.
We are also considering running an online event to discuss the main points from the Budget and what this means for financial plans. It’s a bit of a first for us and we’d like to gauge demand. If you, or any of your friends, family and colleagues would be interested in joining us, please let us know here. If there is sufficient demand, we’ll be in touch with details. Please do spread the word to anyone else who might benefit.
Before we dig in, this summary isn’t financial advice and if you’re not already receiving advice, we’d recommend seeking this before taking action.
The Spring Budget in detail
After the chaos of the Autumn Statement, the run-up to the Spring Budget appeared deliberately downplayed, save for a late flurry of leaks highlighting a focus on childcare at one end of the scale and pensions at the other. While acknowledging the Prime Minister’s two objectives of halving inflation and reducing debt, Jeremy Hunt focused his Spring Budget on the Prime Minister’s third objective – getting the economy going.
A focus on the cost of living and getting people back to work
In a wide-ranging and longer than usual speech, there were some key headline items.
The inflation rate is forecast by the Office for Budget Responsibility (OBR) to fall from 10.1% (January 2023) to just 2.9% by the end of 2023. The OBR also forecast the UK economy will avoid a recession.
Up to 30 hours of free childcare per week will be available to working parents of children from the age of nine months by September 2025. Initially, from April 2024, working parents of two-year-olds will be able to access 15 hours of free childcare per week. As a new parent (more details to follow in our next client update), I found myself paying more attention to this part of the announcement than I have before.
The energy price guarantee is maintained at the current £2,500 level until the end of June 2023.
The scheduled 11p a litre duty increases in petrol and diesel will not go ahead.
Pensions were in the spotlight
Not usually a headline grabber, the pensions part of the Budget has come in for lots of attention this time round. The changes announced are a reminder that financial plans are always going to evolve as circumstances and, in this instance, budgetary forces outside of our control, change and compel us to revisit our plans.
The lifetime allowance (LTA) was certainly in the spotlight. The 55% and 25% LTA charge tax rates that apply when an individual exceeds the LTA for pension savings will be reduced to nil from 6 April 2023. Consequently, nobody will face an LTA tax charge from that date. At an unspecified future date, the government will entirely remove the LTA from pensions tax legislation.
For those who have recently crystallised pension and paid tax, this news may not be welcome. For those with pensions underpinned with investments in higher risk, higher return portfolios (in our case the True Wealth 100 portfolio which holds a higher proportion of equities), the removal of the LTA could be further justification for this approach.
A new monetary limit for the tax-free pension commencement lump sum will be introduced for 2023/24 of £268,275 (equivalent to 25% of the current standard lifetime allowance).
The annual allowance for pensions will increase by 50% to £60,000 from 2023/24 and the money purchase annual allowance will rise from £4,000 to £10,000 from 2023/24. With limits lifted, the change to the annual allowance may see more people inclined to save more into their pensions.
Capital Gains Tax
The Capital Gains Tax (CGT) annual exempt amount for individuals and personal representatives will be cut to £6,000 for 2023/24. The annual exempt amount for most trusts will likewise fall to £3,000 (minimum £600), as previously announced. For 2024/25 onwards, the corresponding figures will be £3,000 and £1,500 (minimum £300). The allowance will no longer be index linked. It is clear that where there are gains being made, paying tax on non-tax protected accounts is fast becoming the price we pay.
For business owners
Companies investing in new plant and machinery in the three years from 1 April 2023 can claim a first-year allowance of up to 100% of expenditure.
Small and medium-sized enterprises that spend 40% or more of their total expenditure on research and development can claim a tax credit worth £27 for every £100 they spend from April 2023.
If you or someone you know would be interested in an online discussion with our financial planners about this Budget, let us know here. If there is sufficient demand, we’ll be in contact with details.
If you are a client of Emery Little and have urgent questions, please get in touch. Otherwise, your Financial Planner will discuss any implications for you in your Annual Planning Meeting.