In brief, the message coming from Jeremy Hunt after the first 2023 Budget was calming and without shock tactics’. That being said, the UK will narrowly avoid a technical recession, which is some good news given all of the bad news since the start of the Covid-19 pandemic and the ongoing conflict in the Ukraine.
Whilst most of the messaging surrounding the proposed pension changes has been advertised as being targeted towards NHS staff on generous defined benefit pension schemes – the proposed pension rules will still apply to every individual in the UK.
The Lifetime Allowance, currently £1,073,100, is set to be completely abolished. This Lifetime Allowance works as effectively a ceiling on how much individuals can put away tax-free towards their pension retirement savings. This announcement is fantastic news for individuals who may be on defined-benefit pension schemes who are approaching the Lifetime savings cap through the seemingly arbitrary increase in the valuation of these defined benefit pension each tax year.
More good news for pension savers, the Annual Allowance for pension savings has been increased from £40,000 to £60,000. This proposal will effectively increase the amount individuals can put away into their pensions each tax year, which complements the abolishment of the Lifetime Allowance incredibly well, allowing for an overall more generous pension savings regime for individuals that before.
The message coming from the government is that retirement savings should be incentivized, and not penalized. The last big announcement was in relation to Corporation Tax. Corporation Tax profits over £250,000 are still due to rise (as expected) from 19% to 25% in April 2023. Businesses will now be able to offset 100% of UK investments against their profits to bring down tax liability. However, given the changes to the pension savings regime, individuals can certainly look towards more retirement savings tax planning using their Limited companies in order to avoid the top 25% headline rate of Corporation Tax.