Well, that was an interesting Budget! On the 15th March 2023, Jeremy Hunt stood up to deliver his second budget. Planned changes to pension legislation had been leaked, but the financial planning profession was still taken by surprise!
Here are the main points…
However, individuals who have valid enhanced or fixed protection certificates from before the 15th March 2023 will be able to accrue new pension benefits, join new arrangements or transfer without losing this protection. They will also keep their entitlement to a higher PCLS.
There is still detail missing from how this will all work in practice, but the plan is to remove the LTA from April 2023 and abolish it in a future Finance Bill. Be aware, though, that there is still a long way to go before this is passed as legislation. And even if it is, the Labour Party has already made it clear that they would look to reverse this decision and reinstate a pension LTA if they come into power at the next general election (but with special provisions for medical practitioners). Any additional pension funding being considered by those that already had potential LTA issues should be viewed cautiously in the short term.
If all of that wasn’t enough for pensions, we also had a raising of the annual allowance (AA) from £40,000 to £60,000 from 6 April 2023. This is particularly good news for business owners who can use the increased AA to pay more into pensions to offset the effect of the upcoming Corporation Tax rise.
There was also an increase in the Money Purchase Annual Allowance (MPAA) from £4,000 to £10,000. The MPAA affects anyone who has flexibly taken benefits from a pension since 6th April 2015.
The tapered AA is also increasing from £4,000 to £10,000 from 6 April 2023. Due to the increase in AA, the level at which tapering takes place has risen from £240,000 of adjusted income to £260,000; with tapering maxing out at £360,000 instead of £312,000.
Phew! Now onto non-pension content…
The government are extending existing Income Tax concessions for low income trusts and estates. The idea is to make reporting more straightforward.
Tax thresholds and ISA limits
Personal tax thresholds and ISA limits will remain frozen. As pay increases, this will mean more people fall into higher tax brackets.
Energy price guarantee
The current energy price guarantee of £2,500 is being kept until 1 June 2023, i.e. a further 3 months.
Fuel duty rates are remaining at their current level for an additional 12 months, including the temporary 5p fuel duty cut.
Business tax and allowances
This isn’t our area of expertise, so ensure you talk to your accountant about this.
If you have any questions, please don’t hesitate to get in touch.