Budget at-a-glance: From pensions to childcare, what it means for you
Chancellor Jeremy Hunt announced changes to pensions, childcare, defence spending and more in today’s Spring Budget.
The headline announcement was the scrapping of the lifetime cap on pensions savings in an effort to keep more people working longer.
It means pension savers won’t face tax penalties on the money they put aside for retirement – no matter how big their pot grows. Before today, they would be taxed if the amount rose above £1.07million.
Hunt also boosted free childcare and extended the £2,500 energy price guarantee for three months from April to June.
We explain all of the key announcements and what they mean for your finances.
Back to work budget: Chancellor Jeremy Hunt has unveiled measures designed to keep people in work
Lifetime pension allowance abolished
Jeremy Hunt has handed high-earning savers a huge boost by abolishing the lifetime pension allowance.
The limit placed a cap on the amount people can have in their pension pot without facing tax penalties when they withdraw it.
It had been due to remain at £1.07million until 2026 – but now the limit has been abolished altogether.
The Government is trying to make it worthwhile for people to stay in work, especially high-earners such as doctors.
>What the lifetime allowance and annual allowance changes mean for you
Annual pension allowance increase
In addition, the annual pension allowance has been lifted by £20,000, going from £40,000 to £60,000 – a 50 per cent increase.
The annual allowance is the standard amount people can contribute to their pension every year and qualify for tax relief. It includes your contributions, your employer’s contributions and tax relief.
The rules are more complicated for higher earners, whose annual allowance is ‘tapered’ down.
> How the annual allowance changes will work
Training for older workers
To encourage over-50s back into the workplace, Hunt is proposing a new internship-style scheme which he dubbed ‘returnerships’.
He said this would train over-50s for new roles in sectors where there are shortages, such as technology.
The Government hopes this will tempt early retirees back to work to fill shortages it claims are holding back economic growth.
Energy Price Guarantee extended until end of June
The Government has extended the energy price guarantee for another three months. It means that for the typical household, energy bills will be capped at £2,500 until the end of June.
According to the Treasury, this will equate to a £160 reduction in energy bills for households, on top of the measures already in place.
The price cap will then go up to £3,000 from July. Wholesale gas and electricity prices have been falling steadily since December 2022, but as yet that drop has not been carried over into energy bills. However, homeowners can expect them to fall later this year.
It is worth noting that while the guarantee has been extended, the £400 winter discount households have received since October hasn’t been extended and will come to an end on 1 April.
There was also welcome news for those on prepayment electricity meters. Mr Hunt confirmed that they will no longer pay higher rates for their energy than those on direct debits, ending what he called the ‘premium on the poorest households’.
> Will your energy bills fall or rise? What the price guarantee freeze means
Boost for working parents: The Government has committed to paying childcare costs for under-threes for up to 30 hours a week
Childcare costs for under-threes
After much has been made of the cost of childcare and the impact it has on keeping new parents out of work, the Chancellor has announced free childcare for under-threes as one of his back to work measures. However, the measures are being phased in to overwhelm providers with demand.
The Government has committed to paying for 30 hours of free childcare for children over nine months, in addition to the existing system for three-year-olds.
The announcement is expected to cost the Government around £4billion in additional funding.
In addition, Mr Hunt has increased the hourly rate paid to childcare providers by the Government and increased minimum child ratios from 1 to 4 to 1 to 5.
Furthermore, to encourage more people to join the child care profession, new joiners will receive incentive payments of £600, rising to £1,200 for those joining through an agency.
In a further move to support parents, those on universal credit will see their childcare allowances increase and they will be paid upfront.
> Will you get 30 hours free childcare: Budget shake-up explained
Fuel duty freeze
The Government has opted to freeze fuel duty for another year keeping in place the 5p cut introduced last year due to high prices. The move saves the average driver £100 over the next year.
It is understood the Treasury was previously looking at increasing petrol prices by around 11p per litre later this year.
The cost to the Government of freezing it at the current level is estimated at around £6billion.
> Fuel duty frozen for 13th year: How much of petrol and diesel is tax
Drinking duty: The Wine and Spirit Association says today’s hike is the ‘biggest tax increase on wine in the past 50 years’
Alcohol duty increase
Tax on alcohol will rise in line with retail price index inflation from August, and a new regime where drinks are taxed based on their alcohol content is also coming into effect.
The increases were announced in 2021, but implementation was pushed back by six months until August 2023. The Government has now confirmed there will be no further delays.
It is the biggest tax increase on wine in the past 50 years, according to the Wine and Spirit Trade Association.
However, Hunt said that from August 1, the duty on draught drinks in pubs will be up to 11p lower than the cost in supermarkets.
> Cheers Jeremy! ‘Brexit pubs guarantee’ cut to tax on pints
Pothole fund to fix Britain’s roads
In a victory for the Daily Mail’s pothole campaign, the Chancellor has announced an additional £200million fund to fix Britain’s craters. The pledge means around four million more holes will be filled.
The cash represents a boost of almost a fifth to annual funds for fixing crumbling rural and local routes, and will be released to councils in England in the coming weeks.
As the money is earmarked for town halls it means residential streets, country lanes and smaller B and C roads should benefit.
Business tax breaks: While Mr Hunt has ended the ‘super-deduction’ scheme, he has introduced full capital expensing for businesses for the next three years
Corporation tax increase and business tax breaks
Corporation tax on businesses will still rise to 25 per cent from 19 per cent from April, despite significant opposition from the Conservative backbenches.
But Mr Hunt says new business tax breaks will cushion the blow, largely in the form of full capital expensing.
Rishi Sunak’s ‘super-deduction’ scheme is coming to an end this month. The scheme allowed some firms to deduct up to 130 per cent of cost from profits before tax and a special 50 per cent rate first year allowance that lets you deduct 50 per cent of the cost from your profits before tax.
Now the Government has introduced full capital expensing for businesses for the next three years, with the intention to make it permanent as soon as it is ‘responsible to do so’.
It means all money a company invests in IT equipment, plant or machinery can be deducted ‘in full and immediately’ from taxable profit.
The Government says it is a saving of £9billion a year for businesses and is predicted to increase business investment by 3 per cent annually.
And in a boost for small and medium innovation businesses, they will be able to claim £27 worth of credit for every £100 they spend if they spend 40 per cent or more of their total expenditure on research and development.
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