Against a backdrop of the continuing pandemic, global supply chain issues, plus significant concerns over rising energy prices and inflation, Chancellor Rishi Sunak has delivered his third UK Budget announcement.
So, what was announced?
No changes to income tax rates
The Government has again stood by its election promise not to raise income tax rates. The tax burden for some will still increase as the personal allowance and the basic rate tax band will stay at £12,570 and £50,270 respectively until 2026. As we are currently in a period of rising inflation, if earnings keep peace with some may find they need to pay more tax to maintain their spending power.
Temporary National Insurance rises confirmed
Lifetime allowance freeze re-confirmed
Although a pension pot of this size may seem like a significant sum of money, it generally has to last throughout retirement. And while the freeze may only affect a small number of taxpayers, each year that the allowance fails to keep pace with inflation is a step closer to lifetime allowance charges affecting ordinary pension savers.
State Pension to increase
The 2022/23 tax year will see the State Pension rise by 3.1%. This means payments for someone eligible for a full State Pension will increase to £185.15 a week. This equates to an extra £288.60 each year. Those who get the older basic State Pension will see it increase to £141.85 a week. This is an annual increase of £221.
Some allowances remain unchanged
The yearly ISA (Individual Savings Account) allowance remains unchanged at £20,000. This can go into either a cash or stocks & shares ISA, or a combination of them.
The annual capital gains tax allowance and rates, and the inheritance tax rate and nil rate bands all remain the same.
Business rates cut
With the aim of making business rates fairer, business rates will be re-evaluated every three years. In addition, a new investment relief will mean businesses will be able to make property improvements and pay no extra rates for 2023.
The Chancellor added that the measures, in total, will cut business rates by £7bn and that there’d be ‘key reforms to ease burdens’ of the tax.
The planned increase in the multiplier will also be cancelled. This means a tax cut for businesses that is worth £4.6bn over the next five years.
In addition, the increase in corporation tax from 19% to 25% from April 2023 for businesses with profits over £250,000 is re-confirmed.
Planned rise in fuel duty cancelled
As predicted, the Chancellor said that the planned rise in fuel duty will be cancelled, saving £8bn. This is the 12th year in a row it has been frozen and will save the average driver £1,900.
Changes made to alcohol duty
Unexpectedly, the Chancellor announced a consultation on simplifying the alcohol duty rules with a move to rates linked to the level of alcohol content. Popular drinks such as prosecco and fruit ciders are set to benefit.
