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A Budget for Work, Pensions and Childcare

The 2023 Spring Budget may have been well-discussed in advance but nevertheless the Chancellor, Jeremy Hunt, still managed to pull a few rabbits out of his hat. The first was confirmation from the International Monetary Fund (IMF) that the UK economy was on the right track, with the Office for Budgetary Responsibility (OBR) backing this up by forecasting that there will be no UK recession in 2023. Moreover, the OBR believes that by the end of this year inflation will have fallen to 2.9%.

 That enabled the Chancellor to announce a number of measures which looked towards providing support for individuals, families, the voluntary sector and businesses whilst setting the UK on a path to growth. Business support includes an increase in the Annual Investment Allowance, an enhanced R&D tax credit scheme and support across a number of sectors including carbon capture, medicine, and film.

 For individuals the emphasis is very much on providing additional temporary support whilst enabling people to return to the workforce. Looking at day-to-day expenses, the energy price cap is to remain at £2500 for an additional three months and the current 5p cut in fuel duty will be extended for twelve months. Help for those looking to return to the workforce includes:

• the launch of apprenticeships for the over 50s,
• a phasing in of additional childcare support which will eventually deliver 30 hours per week of free childcare for children aged over nine months,
  
• and for the disabled, the abolition of the Work Capability Assessment alongside the separation of benefit entitlement from an individual’s ability to work.
  

 When it comes to investments, the annual ISA limit of £20,000 remains unchanged as does the £5,000 starting rate for savings. However, in a bid to encourage people to remain in the workforce the Chancellor has made significant changes to the pension regime with the last of these very much being an unexpected announcement:

• With effect from April 2023, the pensions tax free annual allowance (the maximum amount which an individual can save into a pension in any year without encountering additional tax charges) will rise from £40,000 to £60,000.
  
• The money purchase annual allowance (the maximum amount which can be saved once a defined contribution pension had been flexibly accessed) is to rise from £4,000 pa to £10,000pa from the same date.
  
• There had been rumours that maximum amount which an individual could save into a pension in their lifetime without incurring additional tax charges, known as the Lifetime Allowance and currently standing at just over £1m was to be increased. Instead, the Chancellor has abolished this ceiling on pension savings from April 2023.