Month: March 2023

Budget 2023: key points at a glance…

Chancellor of the Exchequer Jeremy Hunt was brought in as a safe pair of hands by Liz Truss amid the fallout from last year’s Mini Budget. Of course, Ms Truss herself did not survive much longer, and after being kept in post by Rishi Sunak, Mr Hunt delivered his Autumn Statement, in which he announced a package of tax rises and spending cuts worth £55bn.

Four months later, Mr Hunt finds himself in the unusual position of becoming just the second of the past five chancellors to hold a full Budget – the last one being Mr Sunak himself. As ever, the Chancellor must juggle different priorities, from managing global economic headwinds and tackling the cost of living crisis, to boosting productivity and encouraging more businesses to invest in the UK.

At the same time, Mr Hunt will be mindful of maintaining the confidence of the markets and assuring the voting public that the Conservatives are the party of fiscal responsibility. And of course, he will be acutely aware of the feelings of many backbench Conservative MPs who are calling for sweeping tax cuts at a time when the UK’s tax burden is at a 70-year high.

The political background

Since replacing Liz Truss as Prime Minister last October, Rishi Sunak has been keen to establish himself as a serious politician who can restore Britain’s financial and international credibility.

He began 2023 by unveiling his five priorities: halving inflation this year, growing the economy, reducing national debt, cutting NHS waiting lists and stopping small boats carrying migrants from crossing the English channel.

Mr Sunak also achieved a Brexit breakthrough last month by agreeing a new deal with the European Union designed to reduce the frictions on Great Britain-to-Northern Ireland trade, known as the Windsor Framework. In addition, the Prime Minister recently visited Paris to meet with French President Emmanuel Macron, where a £500m package to help stop migrants crossing the Channel in small boats was agreed.

Notably, both these announcements were characterised by much warmer relations than we have seen of late, with EU President Ursula von der Leyen addressing Mr Sunak as “dear Rishi” during the Windsor Framework announcement, and many of the newspapers observing an apparent bromance between the Prime Minister and the French President.

But these successes were quickly displaced in the headlines by other matters, such as WhatsApp messages sent by former Health Secretary Matt Hancock being leaked to The Telegraph and Gary Lineker’s criticism of the Government on Twitter triggering a national debate over the BBC’s impartiality.

The Conservatives also consistently lagged behind Labour in the polls over the last few months, and Leader of the Opposition Sir Keir Starmer actively sought to build on this by positioning his party as a government in waiting. For instance, Sir Keir and Shadow Chancellor Rachel Reeves met with policymakers and business leaders at the World Economic Forum in Davos earlier this year, and the Labour leader later visited Ukraine’s President Zelensky to reaffirm Britain’s continued support for the country if his party wins the next general election.

Meanwhile, Chancellor Jeremy Hunt sought to lay the groundwork for the Budget by warning that “significant” tax cuts in the Budget were “unlikely”, arguing instead that halving inflation was “the best tax cut right now”. However, we know from previous Budgets that even in grim economic circumstances, Chancellors often find some money in their back pocket to guarantee positive headlines the next day, and the government did trail some giveaways ahead of the speech, such as expanding free childcare to one-and two-year-olds and extending energy bill support to the end of June.

The economic background

The year started with a cautious hope that the UK may be over the peak of the inflation crisis. According to the Office for National Statistics (ONS), overall UK consumer price inflation fell from 10.5% in December to 10.1% in January – this was the third monthly fall in a row. However, it must be said that inflation remains well above the Bank of England’s target of two per cent, and many of the factors that have pushed up prices over the last year, notably Russia’s invasion of Ukraine, still exist.

There was further grounds for optimism in the latest economic figures, which showed that following a sharp fall of 0.5% in December, GDP grew by 0.3% in January, but looking more broadly, growth was found to be flat in the three months to January, so again, the picture is mixed. Meanwhile, interest rates have risen to their highest level for 14 years, with the Bank of England’s Monetary Policy Committee voting last month to raise the benchmark rate by 0.5% to 4%. This is the tenth interest rate rise in a row.

Clearly, Jeremy Hunt faced a very challenging backdrop as he rose to speak, so let’s take a look at what he announced.

The speech

Opening remarks
Mr Hunt began his statement by insisting that in the face of “enormous challenges”, the British economy is “proving the doubters wrong”.

The Chancellor’s statement was accompanied by forecasts from the Office for Budget Responsibility (OBR), which predicts that while the economy will shrink by 0.2% this year, it will avoid falling into recession.

The OBR then expects to see GDP go up by 1.8% in 2024, 2.5% in 2025, 2.1% in 2026 and 1.9% in 2027. Inflation, meanwhile, is tipped to fall from 10.7% in the final quarter of 2022 to 2.9% by the end of 2023.

Personal taxation and allowances

What 30 hours of free childcare for children over the age of 9 months.
When Introduction to be staggered. Working parents of two-year-olds can access 15 hours of free care from April 2024. This will be extended to all children from 9 months to two years from September 2024.

From September 2025, every single eligible working parent of children aged between 9 months and 3 years will be able to access 30 free hours per week.
Comment This provision will apply to eligible households where all adults are working at least 16 hours, from the moment maternity or paternity leave ends, for 38 weeks of the year.

What Government to pay childcare costs upfront for parents on Universal Credit.
When Date not confirmed.
Comment This will apply to parents on Universal Credit who are moving into work or want to increase their hours. They will be able to claim a maximum of £951 for one child and £1,630 for two children.

What 5p reduction to fuel duty to be extended for another 12 months.
When Immediately.
Comment Last year’s 5p cut will be maintained for another 12 months and the planned 11p rise in fuel duty will be cancelled.

What Tax on draught beer in pubs to remain frozen.
When From 1 August.
Comment Draught Relief extended from 5% to 9.2%, so that the duty on draught products in pubs will be up to 11p lower than the duty in supermarkets. Duty has been increased from 20% to 23% for wine, spirits and other fermented draught products.

What Universal Credit sanctions regime to be strengthened.
When Date not confirmed.
Comment Sanctions to be applied more rigorously to people who do not meet strict work-search requirements or choose not to accept a reasonable job offer.

Work coaches will receive additional training to apply sanctions effectively, and parts of the process will be automated to reduce error rates and free up work coach time.


What Pensions annual tax-free allowance to go up to £60,000.
When 6 April 2023.
Comment The pensions annual tax-free allowance will be increased by 50% from £40,000 to £60,000. A welcome boost for savers who are able to take advantage of the tax benefits of pension contributions, although the taper applied to high earners could restrict the potential contributions.

What Lifetime allowance charge to be abolished.
When 6 April 2023.
Comment The lifetime allowance charge is to be removed next month, before the allowance is fully abolished in April next year. The Government hopes this will encourage over-50s to extend their working lives.

What Tapered Annual Allowance threshold will be increased.
When 6 April 2023.
Comment The adjusted income threshold for the Tapered Annual Allowance will be increased from £240,000 to £260,000.

What Pension Commencement Lump Sum (PCLS).
When 6 April 2023.
Comment The maximum Pension Commencement Lump Sum for those without protections will be retained at its current level of £268,275 and will be frozen thereafter.

What Money Purchase Annual Allowance to increase to £10,000.
When April 2023.
Comment This measure is designed to encourage working age adults not in employment to return and supplement their income, or boost their retirement savings.

Business investment and taxation

What Corporation Tax to increase to 25%.
When 6 April 2023.
Comment Corporation Tax is to go up from 19% to 25% for companies with over £250,000 in profits.

What Annual Investment Allowance increased to £1m.
When 1 April 2023.
Comment Introduced to incentivise investment, this means 99% of all businesses will be able to deduct the full value of all their qualifying investments from that year’s taxable profits.

What Full capital expensing.
When 1 April 2023.
Comment Every pound a company invests in qualifying IT equipment, plant or machinery can be deducted from taxable profits in full.

This will be in place for the next three years, although the Government wants to make it permanent “as soon as we can responsibly do so”.

What Enhanced R&D tax credits.
When 1 April 2023.
Comment An increased rate of relief for loss-making R&D intensive small and medium- sized enterprises (SMEs). Eligible companies will receive £27 from HMRC for every £100 of R&D investment.

In addition, SME companies for which qualifying R&D expenditure constitutes at least 40% of total expenditure will be able to claim a higher payable credit rate of 14.5% for qualifying R&D expenditure.

The cost of living crisis

What Energy Price Guarantee extended.
When Next three months until June.
Comment The Energy Price Guarantee will remain at £2,500 for the typical household for the next three months.

What Prepayment meter charges to be brought in line with direct debit charges.
When 1 July 2023.
Comment This will apply to over four million households on prepayment meters.

Other measures

What Funding for wraparound care at school.
When 2024-25 and 2025-26 academic years.
Comment Schools and local authorities will receive £289 million in start-up funding to increase the supply of wraparound care, so parents can drop their children off between 8am and 6pm.

What Increased funding for nurseries.
When September 2023.
Comment The funding paid to nurseries for the existing free hours offers will be increased by £204m from September, and then rise to £288m next year.

What Reforms to disability benefits.
When No date confirmed.
Comment The Work Capability Assessment is to be abolished and a new voluntary employment scheme for disabled people called Universal Support will be introduced.

The Government will spend up to £4,000 per person to help them find appropriate jobs and implement the support they need, and fund 50,000 places per year.

What £400m plan to increase the availability of mental health and musculoskeletal resources.
When No date confirmed.
Comment This measure is designed to reduce the number of people being forced to leave work because of a health condition such as back pain or a mental health problem.

What Measures to help children in foster care have a normal working life.
When April 2023.
Comment The Qualifying Care Relief threshold will go up to £18,140, which represents an average tax cut of £450 a year for qualifying carers.

What Increased funding for the Staying Close programme.
When By March 2025.
Comment Funding for the Staying Close programme will increase by £8.1 million in each of the next two years to help more care leavers find work.

What Mid-life MOT offer to be expanded.
When No date confirmed.
Comment The Department for Work and Pensions “Mid-life MOT” strategy will be enhanced to increase the number of people getting high-quality financial, health and career guidance ahead of retirement.

This will include an improved digital tool and up to 40,000 in-person mid-life MOTs for Universal Credit claimants aged 50 or above.

What New apprenticeships for over-50s.
When No date confirmed.
Comment Apprenticeships for over-50s who want to return to work, called Returnerships, will be introduced. These will run alongside sector-based work academies and skills boot camps.

What £11bn increase to defence budget.
When Over the next five years.
Comment No doubt influenced by the war in Ukraine, the government will add a total of £11bn to the UK’s defence budget over the next five years, taking the overall budget to nearly 2.25% of GDP by 2025.

What £33m to support military veterans.
When Over the next 3 years.
Comment An additional £33m is to be invested in increasing the capacity of the Office for Veterans’ Affairs, supporting veterans returning from their service with injuries, and increasing the provision of veteran housing.

What 12 new investment zones.
When Investment Zone proposals to be agreed by the end of the year.
Comment These will be spread across the West Midlands, Greater Manchester, the North East, South Yorkshire, West Yorkshire, East Midlands, Teesside and Liverpool, and there will be at least one in each of Scotland, Wales and Northern Ireland.

Each of these areas will apply to create an investment zone in a chosen location, and if successful, they will be able to access £80m worth of support for areas such as skills and infrastructure, as well as tax reliefs and grant funding.

What Regeneration and levelling up projects.
When Various.
Comment Over £200m is to be invested in high-quality local regeneration projects across England, and a further £161 million for high-value capital
regeneration projects in city regions across England.

More than £400m will be made available for new Levelling Up Partnerships and £8.8bn will be allocated over the next five-year funding period as part of the second round of the City Region Sustainable Transport Settlements.

What Potholes fund increased by £200m.
When 2023-2024.
Comment The increase is expected to enable local authorities to fix the equivalent of up to 4 million additional potholes across the country.

What Increased funding for Carbon Capture Usage and Storage.
When Shortlist of projects to be announced later this month.
Comment Up to £20bn of support is being allocated for the support of Carbon Capture Usage and Storage development.

What Great British Nuclear to be launched.
When This year.

The Government will launch Great British Nuclear to support new nuclear builds and bring down costs. The initiative is aimed at increasing the UK’s resilience to future energy price shocks

Mr Hunt has also confirmed that, subject to consultation, nuclear power will be classed as “environmentally sustainable”.

What Extra funding for devolved governments.
When 2023-24 and 2024-25.
Comment The Scottish Government will receive an additional £320m, the Welsh Government will get an extra £180m, and the Northern Ireland Executive will receive a further £130m.

Conclusion and reactions

Reaction to the speech
Labour leader Sir Keir Starmer responded to the Budget speech by criticising Mr Hunt for “dressing up stagnation as stability”. He described the Chancellor’s announcements as being “nowhere near the mark”, adding that “the more he pretends everything is fine, the more he shows just how out of touch they are”.

The Guardian newspaper expressed a similar view, saying “Hunt’s Budget shows Britain is doing less badly – that’s not the same as doing well”. The Daily Mail, which had effusively hailed Kwasi Kwarteng’s ill-fated fiscal event as “a true Tory Budget”, adopted a more cautious approach this time round, leading with the view that Hunt was offering a “carrot and stick”.

However, there was praise from some quarters, with the CBI describing the Budget as “a strong second act in the Chancellor’s plan for stability and growth”, and saying that the measures to help households and businesses will “secure the growth we need to boost living standards for all”.

The Institute for Fiscal Studies (IFS) responded by noting the significance of what wasn’t announced. For example, it said Mr Hunt had made a “political choice” by offering no funding to improve pay offers to striking public sector workers, and pointed out that the big personal tax rises planned for next month will still go ahead. The IFS added that while Mr Hunt is optimistic, households are still “in the midst of an enormously difficult period”.

Right-wing think tank Institute for Economic Affairs tentatively praised some aspects of the Budget, such as the abolition of the lifetime pension allowance and steps to encourage business investment. However, it said the Budget “lacks ambition” and is “nowhere near enough to jumpstart the British economy”, as the tax burden and public spending “remain historically high”.

The Resolution Foundation, meanwhile, had a mixed view of the Budget, stating it is likely to be more successful in boosting employment than investment. The organisation was particularly critical of Mr Hunt’s tax changes to discourage early retirement, describing them as “hugely regressive and wasteful”.

While many of the measures announced in the Budget, such as the changes to childcare and pensions, were significant, it was notable that there was no single headline-grabbing, rabbit-out-of-the-hat moment.

This will likely suit Mr Hunt, as he seeks to consolidate his position as a steady, competent pair of hands, following the chaos we saw last autumn.

At the same time, it makes political sense for the Conservatives to tentatively park their tanks on Labour’s lawn on issues such as the cost of living, rather than make a full-on assault, as the general election is still likely to be at least a year away. Given the current stage of the electoral cycle, any eye-catching giveaways may have to wait.

The OBR’s view that the UK will avoid slipping into recession this year is undeniably welcome news, and Mr Hunt was certainly keen to push an optimistic view of the country’s economic prospects.

But whether the Chancellor’s measures will help to kickstart growth, insulate households and businesses from soaring costs and boost productivity remains to be seen. Whatever happens, you can be confident that we will be at your side throughout, helping you work towards your financial goals.

Can you afford to retire early ?

Early retirement – retiring any time before the state pension age of 66 – is the dream for many.

The pandemic focused many people’s minds; making them think about what they want out of life – and for many in a position to make big changes, early retirement was the big one.

The House of Lords Economic Affairs Committee has recently been looking into what’s driven an increase in economic inactivity over the last three years, and found that the key factor is 50- to 64-year-olds choosing to retire early.

In fact, the number of people taking up this option since 2020 is higher than the number of people who’ve left work because of long-term sickness.

But a particularly interesting finding of the report is that many of those choosing to retire early were already self-employed or working part-time, and therefore already winding down their careers.

That suggests that many of these people were confident that they had the financial means to retire before the age of 66.

Early retirees in a strong financial position
The House of Lords committee collated a number of recent studies, including ONS figures showing that two-thirds of 50- to 64-year olds who have left work since the pandemic began, own their homes with no outstanding mortgage.

Peers also looked at data from the Financial Conduct Authority, which showed 92 per cent of 55- to 64-year-olds who had retired, or whose partner had retired, in the year to May 2022, owned their own home. Some 78 per cent of this group owned their property outright and had no outstanding mortgage debt.

As the committee notes: “This evidence supports the view that over-55-year-olds who have retired early during the last year are, on average at least, relatively well resourced.”

It’s an interesting trend, given that Chancellor of the Exchequer Jeremy Hunt recently called for older people who have left the workforce to come back, as this would help to “fix our productivity puzzle”.

In a keynote speech, he said: “To those who retired early after the pandemic or haven’t found the right role after furlough, I say: ‘Britain needs you’ and we will look at the conditions necessary to make work worth your while.”

Whether Mr Hunt’s rallying call succeeds remains to be seen, but he may be wise not to get his hopes up, particularly as the House of Lords report shows that many people who have retired recently have a mixture of funding sources, ranging from savings and private pensions to investments.

Gaining a level of financial freedom, enough for you to finish your working life early, is a very common and understandable goal, so is it realistic for ministers to ask people who’ve accomplished this to go back to the daily grind?

The House of Lords committee isn’t optimistic, saying: “The fact that so many recent retirees express no desire or expectation to work suggests it is unrealistic to base policy solutions on persuading or facilitating these people to re-enter the labour force.”

Will this trend continue?
Although the UK narrowly avoided falling into recession at the end of last year, ONS figures showed there was zero growth in Q4 2022.

This prompted Jeremy Hunt to point out that while the figures showed the “underlying resilience” of the economy, we are “not out of the woods”. Indeed, the Bank of England is still forecasting a recession at some point in 2023.

So if you’re among those exploring the option of taking early retirement, what could this mean for you and your lifestyle choices?

According to forecasts by the National Institute of Economic and Social Research, fewer workers will be able to afford to retire early over the next few years, and more 50- to 64-year-olds will return to the workforce.

This, it believes, is because high inflation is leading to people’s savings “being run down”, and could lead to the participation rate for the working age population soon going back to its pre-pandemic level.

Increasing the size of the labour force might be good news for the Chancellor, but if you dream of retiring early and want to make sure your plans aren’t knocked off course by economic headwinds, now could be the perfect time to get a professional financial planner to look at your finances.

With a regulated specialist in this area offering you guidance and support, you’ll be in a much stronger position to work towards your goals, make the right financial decisions and get the retirement you deserve.

Please don’t hesitate to get in touch if you have any questions.

What would a cashless society mean for you ?

Have you ever gone to the till to pay for an item, handed over cash from your pocket and had it refused? As cashless payment methods, such as digital payments by smartphone, become increasingly popular, many businesses are no longer accepting cash.

Or at the very least, many are openly asking if their customers can avoid using cash to make a payment.

According to research by LINK, nearly half of UK consumers have been somewhere that cash payments have either not been accepted or actively discouraged.

But are the businesses adopting this practice overestimating the appeal of cashless solutions, and potentially alienating those who prefer the alternative?

The figures certainly suggest so, as 49 per cent of people surveyed by LINK said being unable to pay in cash or being discouraged from doing so was inconvenient.

However, this is causing more than minor grumbles. For example, 13 per cent of those polled said they find it harder to keep track of their finances if they have to make card payments in shops rather than use cash.

An important point given the current economic climate, when households are under huge financial pressure and actively counting the pennies much more, especially when it comes to buying food.

Figures from LINK also showed that nearly three-quarters of shoppers used cash in the two weeks leading up to the survey, while over one in three said their use of cash would stay the same for the next six months.

That’s not a small minority of people, and many will probably use a mix of cash and cashless solutions day to day.

So while alternatives such as contactless and mobile payments are clearly popular with millions of people, and look set to remain so, that doesn’t have to mean that cash is taken off the table as a payment option.

It was interesting to note the specific locations where cash acceptance was found to be particularly limited, with car parks, cafes, restaurants and public transport leading the way.

It’s fair to say that these are places used by people of all ages and from all walks of life, so it could be short-sighted of them to rule out or discourage cash payments.

Many of the older generation, for example, may feel far more comfortable paying for goods and services with coins and notes than with an app on a smartphone.

As a separate study by the Royal Society for the Encouragement of Arts, Manufactures and Commerce revealed, 19 per cent of Britons believe they’d struggle to cope in a cashless society, and while 29 per cent say they would be able to cope, it would still be a major inconvenience to them.

So while consumer behaviour is changing, fuelled by factors such as the pandemic and the ever-growing capabilities of digital technology, cash remains a valuable option for many people.

Perhaps true progress means giving people a genuine choice of payment options, with cash sitting happily alongside contactless and Google Pay, so everyone’s preferences can easily be met and people aren’t excluded.

Get ready for the end of the tax year…

The end of the tax year is fast approaching and time is running out.

So in the weeks ahead of the April 5th deadline, what steps should you be taking to make the most of your money and reduce your tax bill?

Here are just a few areas you could look at.

Use your ISA allowance
You can save or invest up to £20,000 a year with a cash ISA, a stocks and shares ISA, or a combination of the two, tax-free.

If you haven’t invested this amount by April 5th, you can’t carry your allowance over and you’ll end up missing out.

Top up your pension contributions
You can pay up to £40,000 into your pension in a single tax year before you have to pay tax on it, so if you aren’t particularly near to this limit, diverting some money into your pension could be a good way to mitigate your wider tax bill.

Use Your Capital Gains Tax allowance
If you sell assets or personal possessions that are worth more than £6,000 – apart from your car – you must pay tax if the proceeds exceed £12,300.

Genuine gifts from a civil partner or spouse don’t count towards the allowance, so it’s worth checking where potential tax savings could be made.

Use your dividend allowance
A dividend allowance is an amount of dividends that you don’t have to pay tax on, which is currently £2,000. So if you’re a company director or shareholder, or get dividends through a Stocks and Shares ISA, you can receive up to this amount tax-free.

Use your Personal Savings Allowance
This allowance lets you earn interest on your savings without paying tax on it, but the size of the allowance depends on your income tax rate.

If you’re a basic rate taxpayer (20 per cent), you can earn £1,000 in savings interest per year tax-free, while higher rate taxpayers (40 per cent) can earn £500 in savings interest per year with no tax. Additional rate taxpayers (45 per cent) don’t get an allowance.

This is by no means an exhaustive list, and many of these options may not even apply to you.

That’s why it’s definitely worth speaking with a professional, regulated financial adviser with experience in this field. They can talk through the choices open to you to help you make the right decisions.

April 5th isn’t far away, so don’t delay!