Spring Budget Statement Winners and Losers: Private Clients

Paul Haywood-Schiefer and Jonathan Barratt have been looking through the details to pick out who benefits and who needs to beware.

Winners

Everyone in employment (except a very small proportion of people earning between £146,350 – £150,000)

This has rather less to do with any specific changes made today, and much more due to the relative calm we now have compared to the chaos seen last autumn, where the current tax year saw employers having to operate three different sets of National Insurance rates and bands. The Health & Social Care levy that operated for part of 2022/23, which added an extra 1.25% to the National Insurance Contributions (NIC) you and your employer pay on your wages, is now consigned to the history bin. With the year ahead now likely to be free of this charge, and with the NIC Primary threshold (the point at which you begin to pay NIC) being aligned to the Income Tax personal allowance for the full year, employees will all be better off in terms of their net pay in the next tax year. However, this is not as rosy as it might first seem: see ‘Losers’ below.

Those with children at nursery

Nursery costs can exceed monthly rent or mortgage costs, so parents of toddlers will be happy to hear measures announced by the Chancellor to extend the 30 free hours of childcare scheme (currently only available when a child is between three to four years old) to parents of children over nine months old. This is a gradual process which will be fully in place by September 2025. The cost of childcare is a significant burden on working parents and those with childcare responsibility and the Chancellor will hope that by doing this, it will provide parents with the opportunity to return to work. Other measures around this have also been announced.

Those with older children

The extension of before and after school and wrap around clubs from 08:00-18:00 will bring welcome relief for working parents who potentially struggle to combine the school run with work commitments. Again, the Chancellor will be hopeful that this increases the quantum of parents in the workforce.

Those with Pension pots approaching the lifetime allowance

The abolishment of the lifetime allowance will be a huge boost to many, particularly those on final salary pension schemes, which includes many senior doctors. The Chancellor will be hoping that this will be an incentive to stop the brain drain of highly skilled workers in their 50’s who may have been contemplating an early retirement and entice some who have, back into work. However, the tapering of allowable annual contributions (before a charge) will stop people from adding significant sums to their pension pots and the tax-free lump sum will remain at £268,275 (rather than 25% of the pension pot).

Everyone with a pension

The extension of the annual allowance from £40,000 to £60,000 allows individuals to contribute up to 50% more to their pension annually (subject to tapering for high earners) than the current tax year. This measure alongside the lifetime allowance reform is aimed at increasing workforce participation of more experienced workers alongside allowing individuals to further fund their retirement.

Pubs and draught beer enthusiasts

Those connected to ‘The Great British Pub’ through either employment, ownership or customer enjoyment will be glad to hear that alcohol rates will be frozen and rates on draught products within pubs will be lowered from August 2023.

Energy consumers, especially those on prepayment meters:

The retention of the Energy Price Guarantee for another three months will help all individuals and businesses during times of rapid inflation. Individuals on prepayment meters will see their energy costs aligned to those on direct-debit tariffs, which will bring welcome relief as these meters are typically installed in lower income households.

Swimmers

The Chancellor thought he might dip his toe in the water with a welcome boost for Leisure Centres with swimming pools. A £63 million windfall has been given to the leisure sector who’ve faced escalating energy costs but who provide a vital role for all generations in keeping healthy active lives.

Investors and Entrepreneurs

The extension of the annual SEIS Investment Relief Allowance has been introduced to encourage investment in small entrepreneurial businesses in the UK. Alongside increased funding for small businesses, this provides investors the opportunity to manage their tax liability with a doubling of the SEIS annual allowance to £200,000. The continuance of other tax reliefs for entrepreneurs is also welcome.

Motorists

The freeze to the fuel duty will obviously be a direct benefit to all motorists, but beyond this the Chancellor will be hoping that this reduces the inflationary pressures caused by soaring transport and logistical costs for hauliers as well as the public at large.

Over 55-year olds

Anyone interested in a “Returnaship”, an apprenticeship for people over 55 wanting to return to work.

Losers

Everyone

The full reality here is whatever it might look like in terms of increased net income from the current tax year to the next, the position is that with inflation at double figures in the last year, and the continued freeze on personal allowances, we are all at the behest of fiscal drag (meaning people lose a higher percentage of their income to tax, because the Government hasn’t increased the thresholds that people pay tax at the same rate as that at which inflation rose). As such, we are all getting less bang for our buck while paying more tax in the process. Particularly pained here are employed earners with children, whose wage increases drag them into higher rate taxes and the high-income child benefit charge (those earning between £50,000 – £60,000).

Smokers

The increase in tobacco duties at above inflationary rates will further increase the cost of tobacco-based products. Given the transition of many smokers to tobacco free alternatives, have the Government missed an opportunity to potentially raise further revenues against these tobacco alternatives.

Those on low incomes trying to get through the next winter

With the support for energy bills ceasing in June, many on low incomes will be worrying about their energy bills post that time. The hope would be the Government reviews this again nearer the time this relief ceases.

Schools and Teachers

Schools will bear the burden of needing to provide the additional before school and after school arrangements for children. While funding will be provided, this will place strains on schools moving from being educational facilities to taking on roles as child carers for all the children after school hours. Teachers who might have thought they would stay behind to catch up on marking or preparation for the following day could now find themselves hosting a full class of people while still trying to do so.

Would you like to know more?

If you have any questions about the Government’s Spring Budget and how it may impact you, please get in touch with your usual Blick Rothenberg contact Paul using the details on this page. For any media enquiries, please contact David.

You can also visit our Budget Hub, where you can find our commentary and a range of insights to help you better understand how the Budget may affect you.