Spring Budget Summary 2023

Chancellor Jeremy Hunt delivered his budget to parliament on Wednesday 15 March, with measures targeted at his four growth pillars: everywhere, enterprise, employment and education. Here are our key takeaways from his speech.

 General notes 

Except for the pensions tax, there are no further changes to tax rates or thresholds over those announced in the Autumn Statement. As a reminder, from 6 April 2023;

• there will be a cut in the threshold at which the 45% additional rate of income tax applies from £150,000 per year to £125,140,
• the personal allowance and the threshold for the basic rate of income tax, as well as the thresholds for National Insurance contributions (NIC) and inheritance tax are still to be frozen to April 2028,
• there are to be cuts in the dividend allowance (from £2,000 per year to £1,000 per year from April 2023 and £500 from April 2024) and,
• the annual capital gains tax (CGT) allowance will be cut (from £12,300 per year to £6,000 from April 2023 and £3,000 from April 2024). The CGT proceeds reporting limit will also be fixed at £50,000 from April 2023.

Pensions

The Government will raise the Annual Allowance, the annual limit on tax-relieved pension savings, from £40,000 to £60,000 from April 2023. The minimum Tapered Annual Allowance (TAA) will be 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.

Rather than the expected increase in the Lifetime Allowance, the maximum amount of tax-relieved pension savings an individual can have, the Government will remove the Lifetime Allowance charge in 2023 before abolishing it in a future Finance Bill.

The maximum 25% tax-free lump sum is to stay at £268,275 (25% of the current Lifetime Allowance) and frozen going forward – it will not increase when Lifetime Allowance is abolished.

In keeping with the Chancellor’s aim to incentivise older workers back into employment, he announced an increase in the Money Purchase Annual Allowance from £4,000 to £10,000. The increased allowance will mean workers who have flexibly accessed their defined contribution pension savings can contribute more to tax-relieved pension savings in a year.

Capital Gains Tax

The Government will legislate in Spring Finance Bill 2023 to address the position where an asset is disposed of under an unconditional contract. The changes will apply to contracts entered into on or after 6 April 2023 for Capital Gains Tax

Inheritance tax

Legislation in the Finance Bill 2023-24 will restrict the scope of agricultural property relief and woodlands relief to property in the UK. Property located in the European Economic Area (EEA), the Channel Islands, and the Isle of Man will be treated the same as other property located outside the UK. The changes will take effect from 6 April 2024.

The Government is also publishing a call for evidence and consultation to explore the potential expansion of agricultural property relief from inheritance tax to cover certain types of environmental land management.