Spring Budget 2023: A “back to work” budget
By Richard Askew, Managing Director
It wasn’t surprising that Jeremy Hunt’s spring budget didn’t deliver any tax cuts or any significant amendments to the announcements made in the autumn statement. However, the abolition of the lifetime pension allowance was a surprise.
Interventions were clearly aimed at removing some barriers to work for people of all ages. This included further support with childcare for younger children and families on Universal Credit and further support for getting disabled and people with health conditions into sustained work. There will also be a new digital Mid-life MOT check to help older workers understand what their employment choices are. The expansion of the 30 hours free childcare to children from the age of 9 months will be welcome news for many, it’s just a disappointment that some families will need to wait more than two years, until September 2025, before they can access the promised 30 hours of free care for all children aged under five.
Workers can now save more in pensions whilst still receiving tax relief with the Annual Pension Allowance increasing by 50% from £40,000 to £60,000 from April 2023. This will be useful to all workers and will be a useful way for limited company contractors to offset some of the additional tax as a result of recent changes to corporation tax rates and dividend tax. Abolishing the lifetime allowance should also encourage more of our experienced people to stay in work for longer, something that is desperately needed to help with the country’s productivity and growth challenges. Abolishing the lifetime allowance also means larger pension pots can be passed on inheritance tax-free at death.
The capital allowance changes will now allow companies to claim 100% relief on all qualifying capital expenditure without any cap. However, for many small businesses and limited company contractors, the £1m Annual Investment Allowance already provided sufficient scope, so this won’t help much with their rising corporation tax liabilities.
There were no announcements on IR35 despite some calls for this. Some will argue that goes against the theme of “back to work” with the reforms discouraging some to stay out of the labour market. However, umbrella companies still provide a flexible and compliant way to engage in a labour market full of opportunities.
Whilst this was never going to include huge giveaways or tax breaks, people should still look to maximise what is on offer. Taking advantage of the pension reforms will be particularly attractive and useful for many, and salary sacrifice should be considered by PAYE and umbrella workers as a way to boost savings for retirement.
If you’re looking for help to navigate the impact of the budget or boost your earnings, either as an umbrella or limited company contractor, get in touch with Richard Askew at email@example.com or 01900 829703.