As Jeremy Hunt presents the spring budget in the House of Commons – we are all waiting with bated breath to see if some of the leaks from earlier in the week are correct.
It doesn’t seem too long since the catastrophic Trussenomics budget sent currency and bond markets into a tailspin. Based on the reaction so far, this budget has been approved by foreign exchange traders, with the price of sterling has rising ~1% since the Hunt’s delivery of the speech.
The key take-aways as Financial Planners are the following areas:
- Annual Allowance changes
- Lifetime Allowance changes
- Energy Support
- Childcare Support
- Corporation Tax changes
- UK recession forecasts
The pension annual allowance has been increased by 50% from £40,000 per annum to £60,000.
The lifetime allowance has been scrapped completely – this removes the 55% tax charge on lump sum withdrawals and the 25% + marginal rate tax charge on income withdrawals.
The tax-free cash lump sum has been capped at £268,275 which equates to 25% of the previous lifetime allowance of £1,073,100.
Energy support set to continue:
The extension of the household energy support programme will ensure that families continue to be insulated from the volatile energy prices found in the gas and electricity markets over the last 12 months. This benefit is crucial for many households across the country.
The spring budget has boosted childcare support to remove the disincentive of excessive childcare costs keeping people out of the job market. For many, the cost of childcare exceeds their potential earnings – therefore it makes economic sense to stay at home and save costs.
By increasing support for families and reducing the cost of raising children – the disincentive to avoid employment is removed. The benefits of this are multifaceted.
Corporation tax has been increased from 19% to 25% – this is something that has been on the cards for a while and is therefore no surprise to any of us. This will mean that businesses will have lower net profit margins but the tax revenue generated is looked to be redeployed in growth areas of the economy which should present greater prosperity for more people.
UK recession forecasts:
The UK has had a torrid time the last 12 months – with the IMF reporting that it will be the only developed economy to enter recession in 2023. Well, according to the OBR – the chances of recession are now slim and the economy looks forward to 5 years of forecasted growth.
There are additional nuances to all above points, and there are also areas we haven’t covered. The key thing to remember with any budget is the “devil is in the detail” and we will be reviewing the full budget and all of its covenants, caveats and features in the coming days.
If you have any queries – please feel free to get in touch with your adviser. Additionally, feel free to contact us on 0151 520 4353 or email [email protected].
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