In his first Budget as Chancellor, Jeremy Hunt has announced several measures to re-engage those who have left the workforce and encourage business investment.
We’ve summarised the key points for you in a reader-friendly format.
Taxes
The cap on pension savings before incurring extra tax (known as the lifetime allowance) will be abolished. The Lifetime Allowance is currently set at £1.07m.
After being frozen for nine years, the tax-free annual allowance for pension pots will increase from £40,000 to £60,000.
Fuel duty will remain frozen, continuing the 5p cut on petrol and diesel for another year.
Alcohol taxes will rise in line with inflation from August, while new reliefs will be introduced for beer, cider, and wine sold in pubs.
Tobacco tax will increase by 2% above inflation and 6% above inflation for hand-rolling tobacco.
Energy
Government subsidies limiting household energy bills to £2,500 a year will be extended for three months until the end of June.
£200m will be allocated to align energy charges for prepayment meters with prices for customers paying by direct debit, affecting 4m households.
The government commits to investing £20bn over the next two decades in low-carbon energy projects, focusing on carbon capture and storage.
Nuclear energy will be classed as environmentally sustainable for investment purposes, with the promise of additional public funding.
£63m will be allocated to help leisure centres with rising swimming pool heating costs and to invest in energy efficiency improvements.
Work, Benefits & Childcare
The 30 hours of free childcare for working parents in England will be expanded to cover one and two-year-olds, rolled out in stages from April 2024.
Families on universal credit will receive childcare support upfront instead of in arrears, with the £646-a-month per child cap raised to £951.
A £600 “incentive payment” will be introduced for those becoming childminders, and relaxed rules in England will allow childminders to care for more children.
A new fitness-to-work testing regime will be implemented to qualify for health-related benefits.
The government will launch a new voluntary employment scheme for disabled people in England and Wales called Universal Support.
Stricter requirements for looking for work and increased job support will be implemented for lead child carers on universal credit.
£63m will be allocated for programmes to encourage retirees over 50 to return to work through “returnerships” and skills boot camps.
Immigration rules will be relaxed for five roles in the construction sector to ease labour shortages.
The Economy
The Office for Budget Responsibility predicts the UK will avoid a recession in 2023, but the economy will shrink by 0.2%. Growth of 1.8% is forecast for the next year, with 2.5% in 2025 and 2.1% in 2026.
The UK’s inflation rate is predicted to fall to 2.9% by the end of this year, down from 10.7% in the last three months of 2022.
The underlying debt is forecast to be 92.4% of GDP this year, rising to 93.7% in 2024.
Businesses
The main rate of corporation tax, which is paid by businesses on taxable profits over £250,000, will increase from 19% to 25%.
Companies with profits between £50,000 and £250,000 will pay a rate between 19% and 25%.
To promote growth, businesses can deduct new machinery and technology investments to lower their taxable profits.
The government will introduce tax breaks and other benefits for 12 new Investment Zones across the UK, each receiving £80m in funding over the next five years.
To simplify international trade, the government will reduce paperwork and extend the submission deadline for customs forms under streamlined rules.
Other Announcements
A commitment has been made to raise defence spending by £11bn over the next five years.
Prison sentences will be imposed on those convicted of marketing tax avoidance schemes.
Additionally, £200m will be provided this year to help local councils in England repair potholes.
Over the next two years, an extra £10m will be allocated to charities in England working to prevent suicide.
The government also promises a streamlined approval process for new medical products.
Furthermore, £900m will be invested in a new supercomputer facility to support the UK’s AI industry.
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Chancellor Jeremy Hunt’s Budget announcements focus on encouraging those who have left the workforce to return, boosting business investment, and supporting various sectors through financial allocations and policy changes.
It’s essential to stay informed about these developments and understand how they may impact your personal finances and future decisions.
Our goal is to help you navigate these updates and make informed decisions for your financial future.
We encourage you to reach out to your financial planner with any questions or concerns you may have regarding these new measures.
With professional guidance and support, you can confidently adapt to the evolving financial landscape and continue working towards your financial goals.
