Spring Budget update

Jeremy Hunt opened his “Budget for Growth” on 15 March with the latest economic projections from the Office for Budget Responsibility (OBR).

The OBR expects the UK to avoid a technical recession this year, although the economy is set to contract by 0.2% in 2023. Growth is then predicted to reach 1.8% in 2024 and 2.5% in 2025. The OBR predicts inflation to fall to 2.9% by the end of this year – this forecast coming prior to the latest Consumer Prices Index (CPI) figure of 10.4%, which was announced on 22 March.

Pensions and pillars

The Chancellor’s growth strategy has four pillars – ‘Everywhere, Enterprise, Employment and Education’ with key areas of focus including:  providing the right conditions for businesses to succeed, investment for ‘Levelling-Up’ initiatives and new measures to get people back to work, including childcare support.

In one strategy to encourage over-50s to extend their working lives, the government is increasing tax relief limits on pension contributions and pots:

  • The Annual Allowance is being raised from £40,000 to £60,000 from April; at the same time, the Lifetime Allowance (LTA) charge is being removed, and the LTA will be abolished from April 2024
  • The maximum amount that can be accessed tax free (Pension Commencement Lump Sum) will be frozen at its current level of £268,275 (25% of current LTA)
  • From April, the minimum Tapered Annual Allowance (TAA) and the Money Purchase Annual Allowance (MPAA) increase from £4,000 to £10,000. The adjusted income threshold for the TAA also rises, from £240,000 to £260,000.

As previously announced, from April, the full new State Pension is increasing to £203.85 per week and the Basic State Pension increases to £156.20 per week.

Taking sensible tax and pensions steps

It’s important to ensure you are in the best place possible to take advantage of any allowances, exemptions and reliefs available to avoid paying more tax than is necessary. Sensible tax and pensions planning can help to reduce the amount of tax you pay and safeguard your wealth for the future. We can help – please get in touch.

Information is based on our current understanding of taxation legislation and regulations. Any levels and bases of, and reliefs from taxation, are subject to change. The Financial Conduct Authority does not regulate tax planning.