After eighteen months without a full Budget, Chancellor Jeremy Hunt’s Spring Budget in mid-March felt like another step on the road back to normality. Following on from the Autumn statement in November – a Budget in all but name – there appeared little scope for surprise given the continuing focus on inflationary pressures. While careful leaks prepared the ground for expected and welcome measures on increased childcare provision and possible changes to pension allowances, the Chancellor’s rabbit out of the hat was the virtual abolition of the pension lifetime allowance. The move should pave the way for higher earners to continue to work and save for longer without penalty.
Our feature for this edition of our newsletter focuses on the key changes for the new 2023/24 tax year including those higher pension allowances. We highlight other areas where people may be especially affected – some potentially moving into a higher tax band as the additional rate tax band shrinks, while cuts to the capital gains tax exemption may impact on timing disposals.
Alongside analysis of the impact of the Spring Budget we also look at the true costs of inflation. Increases to gas, electricity and food prices have raced beyond the top rate of inflation generally quoted, but the overall effect is different across individuals. Our other stories include:
· The rising cost of retirement – The Pensions and Lifetime Savings Association has found that the cost of a basic standard of retirement has gone up 19% in two years. Flexibility will help to prepare for changing circumstances. You may need to increase your pension contributions or remain in employment for longer to ensure a comfortable retirement. As we went to press, the government confirmed it will not yet bring forward the change in the state pension age to 68.
· Caught in the unmarried trap – Legal and financial safeguards for couples either married or in a civil partnership are wrongly assumed by many to also extend to those cohabiting in long-term relationships. While bereavement benefits have just been extended to those in live-in relationships, other significant rights have not caught up with the rising numbers of cohabiting partners. Open and frank financial planning is essential.
· Matters of life and death – choosing the right cover – The Financial Conduct Authority is concerned about a new life cover product on sale to those worried about the cost of probate to their loved ones. The pre-paid probate market is unregulated and if companies fail, any payments made into a plan are likely to be lost. A general life assurance plan should provide more secure protection.
We will share the next phase of developments with you in June. Please do get in touch if we can continue to help or provide you with more information on any of the topics covered.