The UK Spring Budget 2023 has been released, and it’s important to understand how it will affect your finances. From changes to taxes and benefits to new initiatives and investments, there are several key updates to be aware of. Keep reading to learn more about the latest developments in the UK’s financial landscape.
Changes to income tax rates and thresholds.
One of the most significant changes in the UK Spring Budget 2023 is increased income tax rates and thresholds. The personal allowance, which is the amount you can earn before paying income tax, will rise to £12,570. However, the basic income tax rate will increase from 20% to 22%, affecting that earning between £12,570 and £50,270. The higher rate of income tax will also increase from 40% to 42%, affecting those earning between £50,271 and £150,000. Those earning over £150,000 will continue to pay the additional rate of 45%. These changes will come into effect from April 2023.
Increase in National Insurance contributions.
Another significant change in the UK Spring Budget 2022 is the increase in National Insurance contributions. From April 2022, the rate of National Insurance contributions for employees and employers will increase by 1.25%. This increase is intended to fund the NHS and social care services. The self-employed will also see an increase in their National Insurance contributions. However, those earning less than £9,568 per year will not be affected by this change. It’s important to review your finances and budget accordingly to account for these changes.
Changes to pension contributions and allowances.
The UK Spring Budget 2023 also includes changes to pension contributions and allowances. The lifetime allowance for pensions will increase from £1,073,100 to £1,125,000 from April 2023. This means that individuals can save more money in their pensions without facing additional taxes. However, the annual allowance for pensions will remain at £40,000. This means that individuals can only contribute up to £40,000 per year to their pension without facing additional taxes. It’s important to review your pension contributions and allowances to ensure you are taking advantage of these changes.
Increase in minimum wage rates.
One of the key changes in the UK Spring Budget 2022 is an increase in minimum wage rates. From April 2022, the National Living Wage will increase from £8.91 to £9.50 per hour, benefiting over 2 million workers in the UK. The National Minimum Wage rates will also increase for workers aged 18-20, 21-22, and 23 and over. It’s important for employers to review their payroll systems and ensure they are paying their employees the correct rates. For employees, this increase in minimum wage rates could mean a boost in their income and financial stability.
Changes to housing policies and stamp duty.
The UK Spring Budget 2022 also includes changes to housing policies and stamp duty. The government has announced a new Help to Buy scheme, which will provide first-time buyers with a 5% deposit on a new home. In addition, the stamp duty holiday has been extended until the end of September 2022, providing relief for those looking to purchase a home. However, from October 2022, the stamp duty rates will return to their pre-pandemic levels. It’s important for those in the housing market to stay up-to-date with these changes and how they may impact their finances.
Chancellor Jeremy Hunt delivered his Budget on 15 March.
1. The increase in the main rate of corporation tax to 25%, which has already been legislated will be implemented as planned.
2. The corporation tax super-deduction, which ends March 2023, it will be replaced by a ‘full expensing’ regime, under which a 100% first-year allowance will be available for expenditure on main rate capital assets. This will remain in place at least until March 2026, with the Government indicating an intention to eventually make it permanent. The annual investment allowance remains at £1m.
3. There will be an increased rate of research and development credit for loss-making small and medium enterprises which are R&D intensive (i.e. spend at least 40% of their expenditure on research and development).
4. The Government’s investment zones programme will be ‘refocussed’ on 12 new style investment zones which will focus on high-growth sectors. The zones will qualify for a five-year package of tax reliefs including stamp duty land tax (SDLT) relief, enhanced capital allowances for plant and machinery, enhanced structures and buildings allowances, and secondary Class 1 national insurance contributions (NICs) relief.
5. Amendments will be made to the REIT (real estate investment trusts) regime to enhance its competitiveness. In addition to changes already announced on 9 December 2022, further changes will be made to reduce administrative burdens for certain partnerships investing in REITs. The legislation will also be included in the Spring Finance Bill to make a number of changes to the qualifying assets holding company (QAHC) rules.
6. Legislation for the electricity generator levy will be included in the Spring Finance Bill.
7. The pensions lifetime allowance charge will be removed for 2023/24 and abolished in a later year. The 25% tax-free allowance will be frozen at £ 268,275-lifetime allowance. The pension annual allowance will rise from £40,000 to £60,000 from 6 April 2023 with the minimum tapered annual allowance (TAA) being increased from £4,000 to £10,000, while the adjusted income threshold for the TAA will also be increased from £240,000 to £260,000. The money purchases annual allowance, which applies where benefits have been accessed flexibly, also rises to £10,000.
8. Potentially, one of the biggest interventions for business, as well as families, is the non-tax-related provision of additional free childcare. This does, however, assume it can be resourced and delivered.
Spring Budget – United Kingdom
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