The Budget 2023. What does it mean for me?

Abolition of pension lifetime allowance

We should also celebrate the abolition of the pension lifetime allowance, which allows people to invest more into pensions and is intended to achieve the government’s objective of retaining older workers. The abolition will occur in 2024, with an immediate move to remove the existing LTA charge from April 2023.

Moreover, the increase in the annual allowance from £40,000 to £60,000 will allow pension pots to be grown faster. The continual changing of the rules makes it hard to plan over a lifetime, so this move could represent a chance to cash in large pensions without the penalties and reinvest in other products before the government changes, and the limit is potentially reintroduced. It also raises the question that this is unfair to those who have stopped saving over the past years as they are near the limit and may not be able to make up past payments.

The Money Purchase Annual Allowance (MPAA) will also be raised, doubling from £4,000 to £10,000 from April 2023.

Persuading people to stay and work

The push to get people back to work is an essential priority for the government, and the increase in the amount people can put aside for pensions should help dissuade people from early retirement. However, the current high personal tax rates will counter this success and prevent any overseas workers from coming to the UK, a fact we have already experienced. It does represent an opportunity for people with a pension scheme at the limit to top up further, a situation that should not be overlooked. The increase may not persuade many people back into work, but it does remove one of the reasons for leaving the workplace. This could be very relevant to the NHS.

Also, to encourage people back to work, the childcare system is being reformed to provide support from the minute maternity leave ends. Hopefully, this plethora of reforms will get many non-working mothers back to work and some new mothers back into work sooner.

Fuel duty freeze

The freeze in fuel duty is a positive step and will help businesses by protecting them from further increases in running costs. The increases in Alcohol and tobacco were expected. Although the draft beer measures are welcome for pubs, as they will pay 11p less duty than a supermarket on beer.

Enterprise zones

The establishment of the enterprise zones is welcome and offers several tax benefits to firms within their boundaries. This is designed to help with levelling up, as it was called, in a bid to spread the wealth of the UK evenly over the whole country.

This measure will create 12 new “investment zones” across the UK.  Mr Hunt said ministers hoped to create “12 new Canary Wharfs”.

These areas will be in

• The West Midlands,
• Greater Manchester,
• the Northeast,
• South Yorkshire,
• West Yorkshire,
• East Midlands,
• Teesside
• Liverpool,
• and at least one each in Scotland, Wales and Northern Ireland

They will be led by partnerships between local authorities, universities, and businesses, aiming to galvanise innovation.

Innovation tax

Innovation tax incentives have also been introduced to give firms 100% write-off for most capital expenditures and extra allowances for specific R and D.

Personal tax

As expected, there will be no changes to personal tax rates regarding income tax and capital gains tax, and even the OBR admits that we are on course for the highest tax burden this country has seen since the second world war.

Overall

Overall, while there were some concerns about the budget, there were some positive aspects. It’s important to remember that the government is trying to balance many priorities, and we should celebrate the measures that will help support the economy, retain workers, and encourage growth.

Contact us today if you would like to discuss any of these matters with our in-house tax team.