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Telephone: 01723 378234 Email: enquiries@moneyweb-ifa.com

Spring Budget 2023

Announcements in the Spring Budget and last year’s Autumn Statement mean that there will be a raft of changes to pensions and tax from April 2023.

The changes affect, in particular, how much can be paid into and taken out of pensions, income tax and capital gains tax.


Lifetime allowance

The lifetime allowance charge will no longer be applied from 6 April 2023 to the retirement benefits clients take that are in excess of the lifetime allowance.

The lifetime allowance will remain unchanged and in place in 2023/2024 and pensions will be tested against it when they are crystallised on retirement or death or when a client reaches age 75 in the same way as before April 2023.

Any excess amount over the lifetime allowance paid out as a lump sum will be taxed at the recipient’s marginal rate of income tax. The expectation is that the lifetime allowance will be abolished from April 2024 although this will require new primary legislation.

Annual allowance

The annual allowance will increase from £40,000 to £60,000 from April 2023.

The minimum tapered annual allowance will increase from £4000 to £10,000 from 6 April 2023 and the adjusted income used in calculating the tapered annual allowance will increase to £260,000. The threshold income amount will remain unchanged at £200,000. This means that the minimum tapered annual allowance of £10,000 will apply to clients with adjusted income in excess of £360,000.

The money purchase annual allowance will increase from £4000 to £10,000 from 6 April 2023. These changes will not apply retrospectively for clients looking to carry forward unused allowances from previous tax years.

Enhanced and fixed protection

Clients who held enhanced protection or fixed protection on 15 March 2023 will be able to make further contributions and transfers from 6 April 2023 and retain their protection.

Tax-free cash

Following the abolition of the lifetime allowance, there will be a cap on the total tax-free cash clients can take of £268,275, 25% of the current standard lifetime allowance.

The Budget document suggests that clients with tax-free cash entitlement in excess of this, or who have scheme specific tax-free cash protection, will retain their entitlement but legislation will be needed to confirm this. Entitlement will remain unchanged in 2023/2024.

Income tax and National Insurance

There are no changes to the rates of income tax and National Insurance in 2023/2024.

The income at which additional rate tax becomes payable will reduce from £150,000 to £125,140 from 6 April 2023 while the personal allowance and basic rate band will remain at £12,570 and £37,700 respectively. This means that the higher rate tax threshold will remain at £50,270 for those entitled to a full personal allowance.

The dividend tax allowance will reduce from £2000 to £1000 from 6 April 2023 and is planned to reduce further to £500 from 6 April 2024. The dividend tax rates for basic rate, higher rate and additional rate taxpayers will remain at 8.75%, 33.75% and 39.35% for 2023/24.

Capital gains tax

The CGT annual exemption will reduce from £12,300 to £6000 from 6 April 2023 and is planned to reduce further to £3000 from 6 April 2024.

The rates of CGT will remain at 10% for gains falling in the basic rate band when added to income and 20% for gains exceeding the higher rate threshold, or 18% and 28% respectively for gains on residential property.

If you need advice on your pension or other financial services, do not hesitate to contact us today, our experienced team will be happy to help 01723 378234 or enquiries@moneyweb-ifa.com

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