On 15 March 2023, the Chancellor, Jeremy Hunt, delivered a range of tax measures in the Budget to support an agenda centred on increasing business investment, enhancing productivity and expanding the domestic workforce to encourage growth. This budget was set against a backdrop of increased optimism from the Office of Budget Responsibility (OBR) with the economic and fiscal outlook more positive than the previous forecast in November with the UK now expected to avoid a technical recession this year.
For a detailed overview of the business tax measures introduced in this Budget, our Osborne Clarke LLP colleagues have put together a useful summary.
Amongst the personal tax measures introduced in this Budget, are changes to the annual allowance for pension savings and the abolishment of the lifetime allowance. The proposed changes are set out below.
The annual allowance for pensions savings (this being the the limit on how much money an individual can build up in pensions savings in any one tax year while benefitting from tax relief) will be increased from the current limit of £40,000 per year to £60,000.
In addition, for members who have started to take money from a defined contribution pot, the Money Purchase Annual Allowance (the limit on how much money such individuals can add to a defined contribution pension in any one tax year) and the Tapered Annual Allowance (which reduces the annual allowance for high earners) will also be increased from £4,000 per year to £10,000.
Most significantly, the Chancellor also announced that the lifetime allowance (the limit on how much an individual can build up pension benefits over their lifetime while still benefitting from favourable tax treatment) will be abolished with effect from 6 April 2023.
The legislative changes are due to be published in the Spring Finance Bill on 23 March 2023.