Spring Budget 2023 – a brief roundup!
On 15th March, Chancellor Jeremy Hunt unveiled a variety of fresh tax, benefits, and energy policies in the Budget. We’ve tried to keep it simple and below we’ve rounded up the key announcements.
Energy Price Guarantee:
The Government has announced that the Energy Price Guarantee will stay fixed at £2,500 per annum, rather than increasing by 20% as previously intended, for a three-month period starting from April 1st. This guarantee governs the energy bills of most households in England, Scotland, and Wales.
Prepayment meter customers will pay less for energy from July:
Beginning on July 1st, prepayment meter customers will be charged the same amount for energy as those who pay through direct debit, thanks to the Energy Price Guarantee modification by the government. Consequently, the Treasury predicts that prepay households will see an average reduction of £45 in their annual energy expenses.
Extended Child-Care support:
Childcare support for parents will be expanded in several ways, which include:
- In England, eligible parents of two-year-olds will have access to 15 free childcare hours for the first time, funded by the government. Starting from April 2024, this benefit will become effective. Furthermore, from September 2025, eligible parents of any child between nine months and school age may receive up to 30 hours of free childcare. It should be noted that, in certain cases, additional payments may be required based on the childminder’s fees, despite the reference to these hours as “free” childcare.
- Parents claiming universal credit in England, Scotland, and Wales can now receive upfront funding for childcare expenses. For those eligible, the first month’s costs will be covered. Following that, similar to current procedures, you must pay and claim back the expenses, with the maximum amount rising to £951 for one child and £1,630 for two or more children.
‘Work capability assessment’ for benefits to be scrapped:
The Government has declared that it will eliminate the contentious ‘work capability assessment’ used by the Department for Work and Pensions to determine an individual’s qualification for specific benefits, such as universal credit, as part of a significant overhaul of the benefits system.
The reform aims to support disabled individuals and those with long-term health issues in seeking employment and remaining in the workforce. According to the Government, this modification will allow disabled benefits claimants to pursue work without losing financial support.
However, in conjunction with the Budget, the Government has also pledged to “strengthen” the enforcement of universal credit sanctions, which could result in more penalties for individuals who are deemed to have failed to seek employment or take up a job.
The precise implementation and timeline of these modifications are not yet clear.
Pension Savers to get extra tax relief:
The Government has unveiled three significant alterations to the tax relief provided while saving for your pension:
- The annual allowance will increase from £40,000 to £60,000 beginning in April 2023.
- From April 2024, the lifetime allowance, presently £1,073,100, will be entirely abolished.
- The money purchase annual allowance will increase from £4,000 to £10,000 in April 2023.
The Government has decided to maintain the current levels of savings and ISA allowances:
- The ‘starting rate’ for savings will remain fixed at £5,000. This allows individuals earning less than £17,570 from employment to earn up to £5,000 in savings interest before paying any tax on it.
- The maximum amount that can be deposited into an adult ISA will continue to be £20,000, and the junior ISA limit will remain at £9,000. Moreover, there will be no adjustments to the Lifetime ISA threshold of £4,000.
Help to Save Scheme extended:
The Help to Save scheme, which offers a 50% savings boost to low-income earners claiming universal credit or working tax credit, worth up to £1,200, was originally set to stop accepting new applications in September of this year. However, it has now been announced that it will be extended until April 2025, with the same terms remaining in place.
Income Tax thresholds are NOT changing:
Although income tax was not a central point of discussion in the Budget, it is an essential aspect of many people’s finances.
Last year, in the Autumn Statement, the Government announced that income tax thresholds would remain frozen until April 2028. This freeze implies that even if someone’s salary increases, albeit below inflation, they will end up paying more in income tax over time.
In some instances, individuals may fall into a higher tax bracket, while others may remain in the same tax bracket but will still pay a higher percentage of their earnings as tax if their salaries rise. This is referred to as “fiscal drag” in Treasury terminology.
Tobacco & Alcohol prices to rise:
Starting from 1 August 2023, the duties on wine, spirits, and beer bottles will increase in line with the Retail Prices Index (RPI) measure of inflation, resulting in a 5p rise in the price of a 500ml bottle of beer or a 250ml glass of wine. However, the duty on a draught pint of beer in a pub will not increase, as it is protected under the Government’s ‘Brexit Pubs Guarantee.’
Moreover, the price of tobacco products will increase starting from 6 pm on 15 March. The Government announced that it would increase by RPI plus an additional 2%, while the duty on rolling tobacco would increase by an extra 4%.
We hope this round up of the Spring Budget has been helpful & clear.
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