2023 Budget: What You Need To Know For Your Finances

Another Budget has come, with Chancellor Jeremy Hunt unveiling the Government’s latest fiscal plans. A raft of new measures were announced around pensions, childcare and of course, taxes. 

Whether you're a homeowner, entrepreneur, or simply looking to manage your day-to-day finances, the 2023 Budget’s key takeaways could impact your financial future. But what exactly did he mention - and how does it affect you and your business?

Let’s get into the details.

Personal tax

Last year, the Autumn Statement was full of planned changes to personal tax allowances. For this Budget, there wasn’t much mention at all.

This means we’ll see from 6th April 2023:

• Threshold reduction for 45% income tax rates

• Reduction in the tax-free dividend allowance from £2,000 to £1,000

• Reduction in the CGT exemption from £12,300 to £6,000

• Inheritance tax nil-rate band freeze at £325,000 until 2027

• Stamp duty threshold increase previously billed as permanent, now set to end 31 March 2025

National Insurance contributions will also remain fixed until 2027/28 after an increase for health and social care was announced by Chancellor Sunak, then swiftly undone by Chancellor Kwarteng.

With no major changes announced to these plans in this year’s Budget, some people’s tax burdens will grow under this ‘stealth tax’ approach. Making the most of ISAs, certain direct investments and investment bonds will be key.

This can get pretty complicated, especially with the new rules in place, so book a call with us today if you’re looking for advice on making the most of your tax allowances.

Childcare

What’s become increasingly apparent over the years is childcare in the UK has grown increasingly expensive, with many parents, particularly mothers, forced out of work because the costs are so high. A national report from earlier this month found three-quarters (76%) of mothers said it no longer made financial sense for them to work.

To address this, the Chancellor announced a phased introduction of 30 hours of free childcare from when maternity or paternity leave ends. Initially, working parents of two-year-olds can access 15 hours of childcare from April 2024, with the 15 hours extended to all children 9 months or older by September 2024.

From September 2025, every parent working 16 hours or more will have access to 30 hours of funded childcare per week. Additional funding was also announced for nurseries, with those offering funded places getting additional £204m funding this September, rising to £288m next year.

This is a huge and welcome change for parents who have struggled with the sky-high costs of childcare. Anything supporting women returning to the workforce - which in turn boosts the economy - is a much-needed policy.

Corporation tax

As previously announced, the corporation tax rate hike from 19% to 25% for top-earning companies is still set to go ahead. However, the Chancellor looked to sweeten the deal by introducing a real firecracker: immediate deductible expensing for IT and machinery.

By this, we mean 100% first-year relief to companies on qualifying IT and machinery investments from 1 April 2023 to 31 March 2026 - with the Chancellor looking to make this permanent in the future.

This certainly sweetens the deal with the corporation tax rise and lessens the overall tax burden for businesses. 

Making sure you’re taking advantage of these breaks to maximise your tax efficiency will be more important than ever, so please reach out if you’re looking for expert advice.

Were there any curveballs?

While most of the Budget headlines were announced in the media already, one shocker rocked the pensions world: the lifetime allowance charge was abolished entirely instead of an anticipated rise to £1.8m. This gives higher earners a chance to contribute more to their pensions, keeping them in work for longer.

If we look at the other pensions announcements:

• A new tax-free lump sum limit of £268,275 (or 25%)

• 50% annual allowance increase from £40,000 to £60,000

• The minimum tapered annual allowance increased from £4,000 to £10,000

• Money purchase annual allowance up from £4,000 to £10,000

This is all in response to NHS senior doctors retiring early because their pension contributions were maxed out, but the abolition of the lifetime allowance means a lot of higher earners will be able to put more away for retirement. We’re sure our pensions colleagues will be very busy in the coming weeks!

Final thoughts

It was a sensible Budget this time around, with the Chancellor keen to avoid any comparisons to the September 2022 Budget that tanked the economy. A few eyebrows were raised at Jeremy Hunt’s ‘low tax’ quips while raising corporation tax, but that’s politics for you…

What matters is the real-term effects of these changes on you and your business. With many tax rates becoming less generous, it’s time to review your strategy to ensure you’re getting everything you can out of the allowances.

At BXD Accounting, we’re on hand to help. Get in touch today to find out how you might miss out on ways to maximise your tax efficiency.