Spring Statement 2023

Jeremy Hunt has released his eagerly anticipated Spring Statement, which included some positive and progressive changes to pension legislation, reflecting the Conservative Government’s objective to entice high earners back to work.

We have summarised what we consider to be the key features below for your reference.

Pensions & Workers

The Lifetime Allowance charge will be removed from April 2023 before the Allowance is abolished entirely from April 2024 in the Finance Act. This relates to the total value of all pension plans for an individual and, at the moment, benefits over the allowance can incur a tax charge of 55%. Therefore this is very positive news, as those benefits can now be taken at the individual’s marginal rate of income tax.

The maximum Tax Free Cash / Pension Commencement Lump Sum (PCLS) for those without protections will be retained at its current level of £268,275.00 and will be frozen thereafter.

The Annual Allowance will be raised from £40,000.00 to £60,000.00 from April 2023.

These reforms will help ensure that highly skilled individuals, such as NHS clinicians, are not disincentivised from remaining in the workforce. Individuals will still be able to carry forward unused allowance from the three previous tax years.

The Money Purchase Annual Allowance (for those who have already ‘flexibly’ accessed benefits) will increase from £4,000.00 to £10,000.00.

The Adjusted income threshold for the Tapered Annual Allowance will also be increased from £240,000.00 to £260,000.00 from 6th April 2023, and the Tapered Annual Allowance is to be increased back to £10,000.00 (up from £4,000.00).

Tax Rates

Most tax rates for 2023/24 were announced in the budget in November 2022, which you can find in our previous news article here.

Here is a reminder of some key points from that Autumn Statement:

· The additional rate tax threshold will be cut from £150,000.00 to £125,140.00 from 6th April 2023.

· The dividend allowance is to be halved from £2,000.00 to £1,000.00 for 2023/24, and halved again to £500.00 for 2024/25.

· There will be a 10.1% increase to the State Pension in line with CPI from 6th April, along with the same level of increase to the Pension Credit.

· The CGT annual exemption will be cut from £12,300.00 to £6,000.00 from April 2023, and to £3,000.00 from April 2024.

· ISA Allowances, Inheritance Tax rates, National Insurance all remain as they are now.

Economy

The UK economy is projected to contract by 0.2% this year but it will avoid recession, and the forecast shows growth of 1.8% next year.

There will be £11bn to be added to the defence budget over the next five years, growing to nearly 2.25% of GDP by 2025.

There are 12 new investment zones, spread across the West Midlands, Greater Manchester, the North East, South Yorkshire, West Yorkshire, East Midlands, Teesside and Liverpool. There will also be at least one in each of Scotland, Wales and Northern Ireland.

The chancellor announced an additional £320m funding for the Scottish government, £180m for the Welsh government and £130m for the Northern Ireland executive.

Always a hot topic, Hunt confirmed they will invest£200m in local regeneration projects around England. He also lays out a further£161m for mayoral combined authorities and Greater London, while £400m will be available for new "levelling up partnerships" in areas like Redcar, Cleveland and Blackburn.

In aims to reduce the carbon emissions that contribute to climate change, up to £20bn of support will be allocated for the early development of carbon, capture, usage and storage, starting with projects from the East Coast to Merseyside to North Wales. Hunt says this will support up to 50,000 jobs, attract private sector investment and help capture 20-30 million tonnes of CO2 per year by 2030.

In addition, Nuclear power will be classed as “environmentally sustainable” which will give it access to the same investment incentives as renewable energy.

Business

Corporation tax for businesses is to increase from 19% to 25% for firms that make a profit of more than £250,000.00.

For smaller businesses they have increased the Annual Investment Allowance to £1m, meaning 99% of all businesses can deduct the full value of all their investment from that year’s taxable profits.

Small or medium-sized businesses will be able to claim a credit worth £27 for every £100.00they spend, if they spend 40% or more of their total expenditure on Research and Development as a tax boost.

Ill health

Chancellor announced proposals to change disability benefits, including plans to abolish the work capability assessment and to separate benefits entitlement from an individual’s ability to work. As a result, disabled benefit claimants will always be able to seek work without fear of losing financial support.

There will be a new, voluntary employment scheme for disabled people where the government will spend up to £4,000 per person to help them find appropriate jobs and put in place the support they need. It will fund 50,000 places every single year.

£400m has been allocated to increase the availability of mental health and musculoskeletal resources for workers.

Universal Credit sanctions to be 'applied more rigorously' to those who fail to meet strict work-search requirements or choose not to take up a reasonable job offer.

For those working low hours, Hunt said the Administrative Earnings Threshold will rise from the equivalent of 15 hours to 18 hours at National Living Wage.

Childcare

Free childcare of 30 hours a week for working parents is being expanded to cover children from the age of nine months and will have a staged roll out process, starting in April and will be fully implemented by September 2025.

Parents on Universal Credit will now receive up to £951.00 for one child and £1,630.00 for two children per month which will now be paid upfront.

Education

The Government will introduce the Lifelong Loan Entitlement in England from 2025, which will have a transformative impact on post-18 study, giving people the opportunity to study, retrain and upskill flexibly throughout their working lives.

Individuals will be able to access loan funding for full or part-time study, for a variety of courses – from degrees to Higher Technical Qualifications – and including modular study.

To support young people into employment, the Department for Education will invest an additional £3m over the next 2 years to pilot an expansion of the Supported Internships programme to young people entitled to Special Educational Needs support who do not have an Education Health and Care Plan.

Ukraine

In an extension of the government’s support for Ukrainians fleeing the war who have arrived in the UK under the Ukraine Visa Schemes, the government is providing £11.5 million to offer intensive English language courses and employment support to up to 10,000 individuals.

This new funding is expected to boost the number of Ukrainians entering the labour market for the first time, as well as helping those already employed into higher-skilled roles.

Fuel & Alcohol

Fuel duty frozen and a 5p reduction will be maintained for a further year.

From 1st August the duty on draught products in pubs will be up to 11p lower than the duty in supermarkets.

Miscellaneous

Potholes - increase funding to help local communities tackle the problem of potholes. The cause will get a further £200m from next year.

£63 million fund to keep leisure centres and swimming pools afloat.

£10 million over the next 10 years to assist with prevention of suicide.

This post is the opinion of Velarium Wealth and contains our understanding of the latest Government Budget Statement as of 15th March 2023 that we feel is relevant at the current time. This document has been prepared for general information only and is not guaranteed to be complete or accurate. It does not contain all of the information which an investor may require in order to make an investment decision.