Spring Budget 2023

Apr 20, 2023

The recent Budget did not bring any unexpected surprises with policies directed at motivating people into work, and keeping them there with key changes on childcare and pensions.

The continuing cost of living crisis facing households was also a major contributor as the Chancellor delivered his first Budget speech. We have looked at how his decisions may affect your business and personal finances.


Key decisions made before the Budget
Many of the biggest decisions affecting our finances had already been made in 2022.

- November’s Autumn Statement saw Mr Hunt announce that benefits and the state pension would rise in April by 10.1%. 

-  Income tax bands were already frozen until 2028 which means a pay rise could drag you into a higher tax bracket or it is likely to mean a greater proportion of your income is taxed.

-  You start to pay income tax on annual earnings of more than £12,570, charged at 20%. You then pay tax of 40% on earnings over £50,270 a year.

-  The highest rate of income tax which has been 45% currently on earnings above £150,000 will be paid on earnings of more than £125,140 from April. Leaving the highest paid potentially paying hundreds of pounds more each year in tax.

-  It was also announced on November that the National Living Wage rate for those aged 23 and above will increase to £10.42 in April from £9.50 an hour with employers expected to cover this cost.

Working for longer as pensions change

The tax-free limit for pension lifetime savings will be abolished in April. At present, you can save just over £1m before an extra tax charge is levied which is good news for savers planning for the long term.

The annual allowance will remain but will increase from £40,000 to £60,000, whilst those who are already drawing a pension, but want to save more will be able to put in £10,000 a year, up from £4,000.

Energy bills help extended

Help with inflated energy bills will be extended for another three months, reversing a previous plan to make it less generous. Under the Energy Price Guarantee, the government has been limiting energy bills for a typical household to £2,500 a year, plus a £400 winter discount.

-  The guarantee will continue at the same level until July, by which time the price of energy should have dropped sufficiently for it to become redundant.

-  The £400 winter discount will end, with no plans to repeat it next winter.


Childcare costs discounted for some

In good news for working parents the 30 hours of free childcare available to 3-4 year olds will be extended to cover younger children in England, when both parents are working.

- The ever increasing cost of childcare has been considered to be a deterrent for some parents returning to work however there are the nursery places available for their children.

- This staged introduction will create 15 free hours of childcare for two-year-olds in April 2024, and in September 2024 for those aged over nine months, then 30 hours for all from September 2025.

Prices continue to rise, but more slowly

Rising prices have been hugely difficult for all to cope with in the last few years, because they have largely centred on the essentials of food and energy. However, the Government now expects inflation to drop to 2.9% by the end of the year down from over 11%.

-  Prices will rise at a much slower rate but there will still be large increases to broadband and mobile bills for millions of people in April, and many homeowners will face higher mortgage rates. 

-  It is estimated that disposable income per person will fall by 6% this financial year and next, the largest two-year fall in living standards since records began in the 1950s.

Fuel duty frozen again

Fuel duty is a tax motorists pay when buying fuels such as petrol and diesel. A scheduled rise would have led to a 12p per litre rise across petrol and diesel prices, but it has been frozen again. In fact a 5p cut will continue for another year.