The Budget and you
How will the budget affect you? The key elements announced in the 2023 Budget are summarized below.
Pensions
The budget contained extra tax relief to help workers saving towards a personal pension. The changes mean that more people will be able to pay more into their private pension before having to pay tax.
The lifetime allowance: to be abolished from 2024.
The lifetime allowance is the amount that can be built up in a personal or workplace pension over a person’s lifetime, while still enjoying the full tax benefits. This is currently £1,073,100 and anything above this limit is subject to a tax charge. However, from April 2024 this will be abolished.
The annual allowance: increased by 50%
The annual allowance is the amount that can be saved in a pension pot in a single tax year, before tax must be paid. From 6 April 2023, this will increase to £60,000 from its current level of £40,000.
The money purchase annual allowance: increased to £10,000
The money purchase annual allowance can be triggered when someone over 55 takes money out of their defined contribution pension pot. It had reduced the amount that could subsequently be paid into a pension to £4,000 a year. However, this change means that amount rises to £10,000 from 6 April 2023.
Income tax
Income tax thresholds: no change
First announced in the Autumn Statement in 2021, income tax thresholds will be frozen until 2028.
Childcare hours: introduced for two-year old children.
From April 2024, 15 hours of free childcare for two-year olds will be available to parents living in England. From September 2025, this will increase to 30 hours for any child aged nine months to school age.
Corporation tax: increased.
First announced in the 2021 Spring Budget, corporation tax will rise from 19% to 25% from April 2023. The tax rise will have the biggest impact on businesses with profits of more than £250,000. Companies with profits of between £50,000 and £250,000 will get some relief. And for small businesses making profits of less than £50,000 there will be no change.
Annual Investment Allowance (AIA) set at £1 million.
The AIA was set to revert to revert to £20,000 after a temporary increase to £1 million from 1 January 2019 to 31 March 2023. However, the 2023 budget has set the amount at £1million permanently. The AIA is tax relief available for businesses investing in plant and machinery, enabling them to make a full tax deduction for qualifying capital expenditure up to an annual maximum.
Full expensing business investment: introduced.
Full expensing will allow 100% of qualifying capital expenditure in the UK to be written off against taxable profits in the year it is incurred.
ISA allowances: No change
All ISA allowances have remained the same: £20,000 for adults, £9,000 for Junior ISAs and £4,000 for a Lifetime ISA.
Energy price guarantee: no change until 1 April.
The energy price guarantee is a scheme whereby the government sets the maximum prices for gas and electricity and compensates suppliers for providing energy at below cost prices. This will remain at £2,500 until the end of June, 2023.
Fuel duty: extended by 12 months.
The 5p reduction on petrol and diesel will remain in place for another year.
Potholes repair fund: increased by £200 million.
The Government’s Potholes Fund – which previously provided £500 million a year to councils – will be increased to £700 million in the 2023/24 financial year.
You can read the Spring Budget in full here.
