Spring Budget 2023 – what it means for you

16th March 2023

Innes Reid Founder, Mark Reidford APFS reflects on the Spring Budget 2023 and what it means for you.

Chancellor Jeremy Hunt delivered his first spring Budget. From news of the lifetime allowance being abolished and the annual pension allowance rising, to new childcare cost measures for working parents, Hunt laid out his plan to tackle sky-high inflation, reduce debt and ‘get the economy growing’.

It was a game changing Budget for pensions. Chancellor Jeremy Hunt’s decision to effectively abolish the lifetime allowance and boost annual allowances from 6 April 2023 brings a breath of fresh air to those whose retirement planning has been stifled by years of tax cuts and freezes.

The constant tinkering and reductions in both allowances have acted as a real disincentive for higher earners to save into a pension over the years. The biggest unintended consequence of the rules saw senior NHS professionals choosing to retire early in recent years because of the tax charges they were triggering.

The changes bring significant headroom back into the retirement plans of people who might have taken a step back from pensions for fear of breaching these allowances. However, they also simplify things for everyone.

Key Retirement Planning takeaways

The lifetime allowance, previously set at just over £1.0731m, will be abolished from April 2024.
The lifetime allowance charge will cease to apply from 6 April 2023.
The pensions annual tax-free allowance will increase from £40,000 to £60,000 from 6th April 2023.
The Money Purchase Annual Allowance (MPAA) will increase from £4,000 to £10,000 from 6th April 2023.
The adjusted income level required for the tapered annual allowance to apply to an individual increases from £240,000 to £260,000, and the minimum amount they can be tapered to will also increase to £10,000, from 6th April 2023.
The upper limit on tax free cash (also known as pension commencement lump sum – PCLS) will be capped at 25% of the current lifetime allowance except where protections apply. From 6th April 2023 it will normally be limited to £268,275.

Highlights from the Spring Budget 2023 and what it means for you

Hunt also announced that 30 hours of free weekly childcare is being extended to cover children below three. It will eventually cover all children from the age of nine months but only apply to households where both parents are working.
Introduction of ‘Returnerships’ – a new offer targeted at the over-50s, which brings together existing skills programmes, supported by £63 million of additional funding.
The government will also increase the number of 50+ Universal Credit claimants who receive mid-life MOTs from 8,000 to 40,000 a year.
Corporation tax will increase from 19% to 25% from April onwards.
Fuel duty will be frozen, with the 5p cut to be maintained for the next 12 months.
Personal tax thresholds and ISA allowances remain unchanged.

Retirement planning opportunities

These extensive changes will reinforce the number one status of pensions as the best vehicle to save for your retirement and will also open up many new retirement planning opportunities.

“One intriguing question for those previously affected by the Lifetime Allowance will be whether or not to resume pension contributions to catch up for lost time?”

As ever, we will be poring over the details to determine how these changes affect our clients.

Get in touch

For all our clients, if you have any questions about the Spring Budget 2023 and what it means for you and how it may affect your own personal finances please do not hesitate to get in touch with your adviser.

If you are new to financial planning and have any questions about how the spring Budget will affect your plans for retirement, get in touch today to arrange a free initial consultation. There is no obligation to work with us after your first meeting. It’s a great way to gauge if financial planning is right for you.

Call 01244 347 583 to speak to our team or complete the form below and we’ll come straight back to you.

The content of this spring Budget article is intended for general information only and does not constitute advice. Investments can fall as well as rise in value, so you could get back less than you invest. If you’re unsure what’s right for your circumstances, ask for financial advice.

All information is from the spring Budget document and the government’s spring Budget bulletin.

While we believe this interpretation to be correct, it cannot be guaranteed and we cannot accept any responsibility for any action taken as result of the information contained within this article.