The Spring Budget is an important event in the financial calendar. Presented each year by the Chancellor of the Exchequer, it offers an update on the current economy and outlines the changes to come in the new tax year. In this guide we bring you all the changes that are likely to impact your personal and/or business finances.
Get help with taxIn line with the Autumn 2022 budget, Chancellor Jeremy Hunt and Prime Minister Rishi Sunak have been open about their priorities for the economy:
It sounds simple on paper but figuring out what this means for you can be tricky, especially when the UK is in a period of instability for the overall economy. There aren’t any households in the UK that haven’t been impacted on the global events over the last few years and this all has an impact on how we plan our finances.
In this article we take a look at the key announcements in the spring 2023 budget and move on to how it could impact people just like you.
Heading into the new financial year, the cost of living crisis has been in the headlines, but the outlook from the Office for Budget Responsibility (or OBR) looks positive, with the UK forecast not to fall into a recession this year and inflation set to drop to 2.9% by the end of the year, down from 10.7% at the end of 2022. Inflation is the rate at which prices increase, as it goes down it doesn’t necessarily mean that prices will reduce so just bear this in mind when it comes to budgeting and planning your finances.
To support households affected by the rising cost of living, The Energy Price Guarantee will be kept at £2,500 for a further three months, extending into June. With gas prices, and subsequently energy bills, expected to fall in the Summer, this measure should help see households through to the warmer months.
Those who use prepayment meters to power their homes are further supported, with changes announced to bring energy rates and charges in line with comparable direct debits.
Additionally, the 5p cut to fuel duty, announced in last year’s budget, has been extended for another 12 months. This will help keep the cost of running cars and other vehicles lower for longer.
The Spring Budget has been dubbed the “back to work” budget by the Chancellor and announces several new measures designed to get more people into employment. This includes scrapping the work capability assessment and introducing universal support, a new voluntary employment scheme, both to help those living with disabilities find work.
New schemes have been brought in to support older workers, including a new type of apprenticeship called a returnship for those over 50 and abolishing the pension lifetime allowance, or the amount of pension savings you can accumulate before you pay tax. The annual tax-free limit for pension contributions has also been lifted from £40,000 to £60,000 per year.
A reform of the childcare system was announced, with parents of children over 9 months offered thirty hours of free childcare a week and an increase in funding for free nursery places. However, these changes are set to be phased in gradually over the next few years to ensure demand for childcare can be met.
The Spring Budget offers good news to the average household, with the extension of the Energy Price Guarantee and the cut to fuel tax helping to keep bills low. Additionally, the premium charges on gas and electricity for those who use prepayment meters being brought in line with direct debit rates will help households reduce their energy bills. The steps taken to help families keep their bills under control will certainly be a relief over the coming year, especially when combined with other changes announced. However, with no changes to income tax rates, and freezes announced until 2028, more will find themselves pulled into higher tax brackets as wages increase over time.
When it comes to personal finance, the 2023 Spring Budget brings plenty of changes certain to have an effect, whether you’re just starting out in your career or working towards retirement. To make sure you’re making the most of your income, why not visit our 2023/2024 tax planning hub?
Much of this year’s Spring Budget focused on getting more people back into work. With new incentives for parents, people living with disabilities and older workers coming into place, it’s clear the government is prioritising growing the UK’s workforce.
Additional changes to Universal Credit apply to those who are not disabled. This will include increasing the Administrative Earnings Threshold, or AET. The AET is the minimum amount a person can earn before being asked to meet with their Work Coach and is set to rise from 15 hours of earnings at the National Living Wage to 18 hours per claimant. The Youth Offer is also set to extend to 2028, helping 16 to 24 year olds who are not in work or education get into work, and £34.4 million will be provided to fund Skills Bootcamps to help those aged 19 and over gain training in sector-specific skills.
Huge reforms to childcare were announced, designed to help parents and carers get back into work. If both parents are working at least 16 hours a week, this is good news, as all children under five years will eventually have access to 30 hours of free childcare per week. However, this won’t be until September 2025, with a staggered start from April 2024. This gradual approach will help childcare providers prepare and scale, ensuring there are enough places for all children.
Nurseries will be further supported with an increase in funding for free places, and incentive payments of £600 for childminders joining the profession will help increase the availability of childcare. These changes will help increase household income for parents and ensure they are better off in the long run.
As with other areas of the budget, those who are currently not in work due to illness or disability will receive additional support designed to help them get back into work. This includes separating benefit entitlement from ability to work by abolishing the work capability assessment, enabling more disabled people to seek employment without fearing losing their benefits. In addition, a new voluntary employment scheme, universal support, promises to spend up to £4,000 per person helping disabled people find jobs and put support in place. Finally, £400 million of funding has been put in place to help those forced to leave work due to health conditions, including mental health.
The Autumn Statement announced a rise in corporation tax, meaning many business owners were set to see an increased tax bill. From the new tax year businesses will have to pay the normal rate of corporation tax at 19% if their profits are under £50,000 for the year. For businesses with profits over £250,000 they will need to pay 25% corporation tax. Between these two rates a system of marginal relief will apply.
However, the Spring Budget brings some relief. From April, businesses will be able to deduct 100% of their investment in IT equipment and plant machinery from their taxable profits. This measure is currently in place for the next three years, however, it may become permanent once the government can afford to do so responsibly.
Small and medium-sized businesses can also take advantage of an “enhanced credit” worth £27 for every £100 spent if they spend more that 40% of their total expenditure on research and development. These measures are set to help business owners balance the increase in corporation tax and lessen the effects on their income but also inspire and reward companies on innovation.
For those over 50, the spring budget offers plenty of support. This includes new apprenticeship schemes, helping those not currently in employment gain new skills and return to work.
The biggest change for older workers comes in the form of pension reform. Previously, the pension lifetime allowance meant some older workers felt pushed out of their jobs for tax purposes. However, the abolishment of the lifetime allowance, and the increase in the amount of tax-free annual pension contributions, means that more people can stay in the workplace for longer as they prepare for the next stage of their life.
Planning for retirement and ensuring your financial legacy can be difficult to navigate. This means a lot of people will need to re-evaluate their retirement plans. Or if you have been putting off planning for retirement now might be a good time to start. For more advice and support from our retirement planning experts, feel free to contact us today.
The Spring Budget provides an opportunity to review your personal finances and ensure you are making the best choices for you. At Unividual, our financial advisers offer tailored advice unique to your individual circumstances. We understand some people might not feel ready for that yet and a good place to start is our free Guide to Financial Planning. Some people choose to do their own finances, often because they think financial planning is for rich people. This is what makes unividual so different to everyone else, we work with a lot of different clients from first time buyers through to extremely wealthy individuals and the service everyone gets is professional, bespoke and innovative. If you’d like to talk about financial planning, or how to get the most out of the new financial year, we’re on hand. When you are ready, reach out to us, by filling in the form below. One of our business owners, Cherie-Anne Baxter, Marketing Director, will be in touch with you swiftly after you have been in touch.
Author & Editor: Cherie-Anne Baxter
Date: 23rd March 2023
