In 2023, Chancellor Jeremy Hunt presented his inaugural budget, which included significant tax hikes and budget cuts. As a result, many households that are already struggling may feel the pinch. To learn more about who will benefit and who will be impacted by the budget, continue reading.
There are several groups who stand to benefit from Chancellor Jeremy Hunt’s budget. Wealthy retirees, in particular, have received a significant boost as the lifetime tax-free pension allowance has been abolished from April 2024. This allowance had previously been frozen at £1.07m until 2028, but the Chancellor’s decision to abolish it together is intended to encourage over-50s to return to the workforce. The annual tax-free allowance for pension contributions has also increased from £40,000 to £60,000, and Mr Hunt has emphasized that tax should not be a reason for anyone to leave the workforce.
Parents of young children in England are another group who will benefit from the budget. Previously, only families with three and four-year-olds were entitled to 30 hours of free childcare per week. However, this entitlement has been expanded to include parents of children under five. The expansion could save parents up to £6,500 annually, but experts warn that failure to implement the reform effectively could lead to longer waiting lists, fewer nurseries, and higher costs. Eligible parents will be able to access free care when their maternity or paternity leave ends, from when a child is nine months until age five. The funding will be released in stages, with parents of two-year-olds able to access 15 hours a week from April 2024, and parents of children aged nine months and above able to access it from September 2024. All eligible parents of children under five will be able to access 30 hours a week from September 2025. Additionally, the staff-to-child ratios for two-year-olds in childcare have been increased from four children to five per staff member, although the new ratios will be optional.
Energy bill payers
Chancellor Jeremy Hunt has announced that the energy price guarantee will remain at its current level of £2,500 for an additional three months, until June. The scheme has become cheaper to maintain for the Treasury due to falling wholesale gas prices. Furthermore, the Chancellor has cancelled the planned reduction in support that would have raised the average energy bill by £500 to £3,000 starting in April. This move means that households will not experience the full effect of Ofgem’s price cap, which will rise to £3,280 between April and June, and it will help bridge consumers into the summer months when energy bills are expected to decrease to around £2,100.
In addition to these changes, Mr Hunt has also reformed energy billing so that households on pre-payment meters will pay the same amount for their energy as those on “comparable” direct debit plans.
The Chancellor, Jeremy Hunt, has announced that the 5p reduction in petrol and diesel duty will continue for another year. This measure was initially set to expire later this month. In addition to this extension, Mr Hunt has also followed the footsteps of his predecessors by freezing fuel duty and cancelling the previously planned inflation-linked increase scheduled for April. This decision has averted a 7p per litre hike in fuel prices and is expected to save the average household around £100 in the coming year.
Furthermore, the government has allocated an additional £200 million to local authorities specifically for the purpose of repairing potholes throughout the country.
Chancellor Jeremy Hunt has announced that the duty on average strength draught beer sold in pubs across the UK will be frozen. This measure will result in a duty on draught products in pubs that is up to 11% lower than the duty on such products in supermarkets starting in August. Mr Hunt further stated, “While British ale is typically served warm, the duty on a pint will remain frozen.”
Chancellor Jeremy Hunt has announced that a fund of £63 million will be allocated to assist leisure centers and swimming pools in covering their increased heating and energy expenses and remaining financially viable. This measure is intended to help keep these facilities “afloat” and enable them to continue serving their communities.
Starting next year, eligible care givers will experience an increase in their tax-free allowance from £10,000 to £18,000. The Chancellor, Jeremy Hunt, has described this decision as a show of support for the “critical role” that foster parents play in society.
Despite opposition from some members of the Conservative Party, Chancellor Jeremy Hunt has upheld his decision to raise the corporation tax rate from 19% to 25% starting next month. This tax hike will primarily affect businesses with profits exceeding £250,000, with companies earning between £50,000 and £250,000 receiving marginal relief. Corporations earning less than £50,000 will continue to pay the current corporation tax rate of 19%.
To offset the impact of this tax increase, Mr. Hunt has announced a new policy of “full expensing” for businesses. Under this scheme, every pound invested in IT equipment, plant, and machinery can be immediately deducted in full from taxable profit. Although this is a three-year policy, Mr. Hunt has indicated his intention to make it permanent, which is expected to cost £9 billion annually.
The implementation of the full 30 hours of free childcare entitlement for new parents will occur in stages, meaning that it will take over two years for parents to receive the full entitlement. Parents of children aged nine months and above will be able to access 15 hours of free childcare from September 2024, while those with two-year-olds will be able to access it from April 2024.
Chancellor Jeremy Hunt has decided to continue the freeze on income tax, inheritance tax, and National Insurance thresholds until April 2028, despite the record tax revenues generated over the past year. As planned, high earners will start paying the 45% top rate of income tax at £125,140, with the threshold decreasing from £150,000 in April.
During November, Mr. Hunt had previously announced that the income tax threshold, at which taxpayers begin paying taxes, would remain frozen at £12,570 until April 2028. Similarly, the “nil-rate band” for inheritance tax, which denotes the amount of wealth that can be transferred without being subject to tax at a rate of 40%, will remain frozen at £325,000.
Despite widespread calls to unfreeze these thresholds in order to support households that are already struggling, the Chancellor has opted to maintain his tax policy stance in this week’s budget.
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