The Chancellor of the Exchequer, Jeremy Hunt, has delivered his Spring Budget, announcing a number of measures including further support for energy bills, expanded free childcare, and the abolition of the pension Lifetime Allowance.
Economy
The Chancellor announced that the UK economy will avoid a technical recession in 2023 due to inflation more than halving by the end of the year. It is forecast to drop from 10.7% at the end of 2022 to 2.9% by the end of 2023.
Pensions
Generous pension tax changes were announced in an attempt to incentivise workers to remain in the labour market and simplify the complexity of pensions tax:
- The pension Lifetime Allowance (the maximum amount that workers can put into their pension pots before they are taxed – currently £1.073m) has been abolished.
- The Annual Allowance (the maximum that can be saved in pensions in a tax year before tax charges) has been increased from £40,000 to £60,000.
- The earnings threshold that dictates whether the Annual Allowance is tapered has been increased from £240,000 to £260,000, and the Minimum Tapered Annual Allowance will be £10,000, increased from £4,000.
- The Money Purchase Annual Allowance, or MPAA, is the maximum amount that can be saved into pensions once a person has started to draw from their pots. This has increased from £4,000 to £10,000.
Childcare
Free childcare will be extended for children aged between nine months and four years to all parents who work at least 16 hours per week.
Energy
The Energy Price Guarantee has been extended for three months, saving the average family £160 on their energy bills and costing the Treasury around £3bn. The prepayment premium will also be scrapped from July, saving about four million households £45 a year.
Corporation Tax
Hunt also confirmed that the government will be pressing ahead with the previously announced corporation tax rise, which will see the tax rate climb from 19% to 25% in April, although the full force of the tax rise will only affect businesses with profits of over £250,000.
Duties
Duties on fuel and draught products in pubs have both been frozen.
