Extra pension tax for higher earners, more free childcare for working parents and all-round help with energy bills top the chancellor’s list of measures for consumers, households and savers.
Retirement benefits for seniors will rise in an effort to encourage early retirement. The £40,000 cap on tax-free annual pension contributions – frozen for nine years – rises to £60,000.
Tax-free lifetime allowance of £1.073 million for the pension pot was scrapped. The chancellor went further than pre-Budget leaks which suggested he could increase the limit to £1.8 million. He said: “Nobody should be kicked out of the workforce for tax reasons.”
For those who have stopped working and stopped contributing to their pension and now want to pay back into the defined contribution pot, the money purchase annual allowance (MPAA) will rise from £4,000 to £10,000.
For those with very high incomes, the so-called taper rules will make it easier to increase their tax-efficient retirement savings. Currently, taxpayers lose £1 in annual allowance for every £2 of “regulated income” above £240,000. This threshold will rise to £260,000.
Childcare is free for working parents in the UK it is extended from children three and four years old to children aged nine months until their third birthday. Available for up to 30 hours a week, it will be phased in in September 2025.
Families with universal credit will receive childcare support up front, rather than having to claim it again later, and it will increase the monthly limit of £646 per child to £951 for one child and £1,632 for two.
The government will also increase the funds that nurseries receive for free hours, solving the problem of providers, who insist that the money they receive per hour cannot cover their costs. Meanwhile, after-hours care for school-aged children will be expanded.
On tengoguarantee the closing price of a typical annual household energy bill at £2,500 will be extended for three more months to the end of June – worth £160 in total for a typical household.
So households will not feel the full force of Ofgem’s price cap – which costs £3,280 – for these three months. The Treasury said lower wholesale gas prices are expected to feed through lower household energy bills from July, while Cornwall Insight data suggests Ofgem’s price cap will drop to approximately £2,100 a year for a typical household.
In addition, the energy premium for prepaid meters will be abolished from July, saving 4 million poor families £45 a year. The cost will be compared to direct debit energy costs, the government said.
However, with rising inflation outstripping salary increases, the impact of income tax will rise in real terms. The threshold is not raised, so more people will pay income tax at the basic and higher rates than before, as it is frozen until 2028.
As previously announced, the annual capital gain tax-free allowance will be £6,000 from April, and will be £3,000 in 2024, when those liable for CGT will pay up to £2,604 more than in the current tax year.
The dividend allowance will drop from £2,000 to £1,000 in the new tax year, then to £500 from April 2024, down one-tenth from the £5,000 allowance when it was introduced in 2016.
alcohol liability will be affected by some changes announced in the budget. To help pubs, the chancellor added draft relief, meaning tax on draft beer and cider will be up to 11p lower than the duty on the same product in supermarkets. This will also apply to pubs in Northern Ireland due to the Windsor framework.
The chancellor also confirmed that from August the alcohol duty will increase in line with inflation, ending the years-long freeze on taxes. From August, the government will also introduce a long-awaited new alcohol tax system, which will charge alcohol duty according to drink strength across the board, increasing taxes on stronger red wine and cider. cigarette duty will also be uprated.
fuel duties will be frozen for another year, with the chancellor extending the 5p per liter cut introduced last year in the wake of rising prices below entering Russia in Ukraine.
The chancellor scrapped a planned increase under the fuel duty “escalator”, which was meant to raise the levy every year, but has been frozen every year since 2011. The Treasury estimates the measures will save motorists an average of £100 a year. Fuel charges are 52.95p per litre.
Promotion of tax avoidance schemefor contractors, freelancers and temporary workers will be a potential criminal offense according to the proposals laid out in the Budget.
The government says this will help up to 2.4 million contractors who unwittingly engage in tax avoidance through agencies they trust to handle their tax affairs, only to later face thousands of pounds in tax bills and unexpected fines.
National Savings & Investmentsthe government-backed savings bank, has been asked to target issuing £7.5bn of premium and savings bonds by 2023-24, as the Treasury tries to expand funding sources.
Reported by Mary McDougall, Peter Campbell, Oliver Barnes, Lucy Warwick-Ching, Bethan Staton, James Pickford and Stefan Wagstyl