UK budget – Spring 2023 – pensions, tax, dividends & ISAs
Jeremy Hunt, the UK Chancellor, delivered his first formal Budget on 15 March 2023. Please contact your financial adviser to discuss anything that may affect you. Here are some important highlights.
Substantial changes to the registered pension tax rules include:
- The removal of the lifetime allowance in 2023/24 and future years;
- The increase in the pension annual allowance from £40,000 to £60,000;
- The increase in the pension money purchase annual allowance from £4,000 to £10,000;
- The increase in the amount of adjusted income at which the pensions taper applies to the annual allowance from £240,000 to £260,000;
- The minimum annual allowance increasing to £10,000 meaning that anyone who has adjusted income of £360,000 or more will have a maximum annual allowance of £10,000;
- A restriction in the PCLS (Pension Commencement Lump Sum) to £268,275, or 25% of the value of a Defined Contribution fund whichever is the lower; and
- Confirmation that people who have previously made an election to secure a higher lifetime allowance (under say fixed, individual or enhanced protection) will be able to make contributions within their annual allowance in 2023/24 without losing the benefits of that protection. In effect this means they will secure an entitlement to a higher PCLS.
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The Government confirmed that the previously announced increase in corporation tax rates will go ahead. This means that companies with profits of £250,000 or more will pay corporation tax at 25%.
Companies with profits below this figure will pay corporation tax at 19% on profits up to £50,000 and 26.5% on profits over that figure. The current generous position on capital allowances will continue into future financial years.
Capital Gains Tax (CGT)
Previously announced changes to the CGT annually exempt amount mean that the individual amount reduces from £12,300 to £6,000 in 2023/24 and then to £3,000 in 2024/25. The comparable trustee exempt amount reduces to £3,000 (2023/24) and £1,500 (2024/25).
Previously announced changes to the dividend allowance take effect from 6 April 2023, meaning that the allowance reduces to £1,000 in 2023/24 and £500 in 2024/25.
Announcements made in the Autumn Statement in November 2023 mean that the income tax personal allowance, the income tax thresholds and the NIC allowances are all frozen until 2027/28. The threshold at which the additional 45% tax rate takes effect reduces from £150,000 to £125,140 (the income figure at which a person loses all entitlement to the personal allowance) in 2023/24.
No change to the current annual ISA allowances. The individual ISA allowance will continue at £20,000 and the limit for Junior ISAs is £9,000.
- Should you invest in a pension or an ISA?
- The secret of being an effective saver
- The benefits of the Lifetime ISA
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