In a bold move aimed at incentivising individuals, particularly healthcare professionals, to extend their working years, the UK government announced the abolition of the Pension Lifetime Allowance (LTA) in the 2023 Autumn Statement. Set to take effect from April 6th, 2024, this decision seeks to encourage more people, especially doctors, to remain active in their professions for longer durations.

Abolishing the LTA

The abolition of the LTA is expected to benefit individuals with substantial retirement savings, as well as public sector workers with sizable final salary schemes. However, amidst the anticipation of this policy change, concerns have been raised within the industry regarding the pace of implementation and its potential implications for customer advice and outcomes.

Industry experts have called for clarity and guidance on the new rules and regulations, urging the government to provide further details to facilitate a smoother transition. Some industry leaders have even advocated for delaying the implementation of the abolition until 2025 to ensure a more seamless adjustment period.

Despite the abolition of the LTA, complexities persist within the pension system, including caps on tax-free lump sums and lump sum death benefits, adding layers of intricacy to navigating the new regulations.

Review of State Pensions

In addition to the abolition of the LTA, the government's 2023 Review of State Pensions shed light on the challenges posed by increasing life expectancy and the fiscal sustainability of the State Pension. As the retirement age is set to rise to 67 between 2026 and 2028, questions arise regarding the government's commitment to intergenerational fairness.

The triple lock mechanism, which guarantees State Pension increases by the highest of inflation, average earnings growth, or 2.5%, continues to be a focal point of discussion. Despite criticisms regarding its cost and fairness, both the Conservative and Labour parties have shown reluctance to reform the triple lock agreement, emphasizing the importance of safeguarding pensioners' financial security.

It remains crucial for individuals to stay informed and proactive in managing their pension plans amidst evolving regulations and policies.

Shampa Roy-Mukerjee is an Associate Professor (Economics) and Director of Innovation and Impact, at RDSBL, UEL.

The amount that you can earn before child benefit payments are withdrawn has been increased in the Spring Budget, meaning that more families will be able to claim the benefit. 

As of April 6, the High Income Child Benefit Charge (HICBC) threshold will increase up to £60,000. 

It’s a tapered charge, so for every £200 that a parent earns that is above the £60,000 ceiling then you will be charged and lose 1% of your child's benefit. 

Once a parent’s earnings are over £80,000 then it will work out that the charges are the same amount as the child benefit payment. 

This is a significant difference from the current system, as one parent can earn £50,000 before child benefit payments are cut, and there is no benefit at all once salaries climb over £60,000. 

The government is enthusiastic about the changes and has said that it will help more than half a million families., with the higher threshold allowing savings of an average of £1260 per year. 

From the 2024/25 financial year the child benefit to the eldest or only child will be £25.60 per week, a rise from £24 under the current system. 

While for other children parents will see weekly benefit payments of £16.95, another increase from the current rate of £15.90. 

You can claim child benefits when a child is under the age of 16 or is under 20 and is in approved full-time education or training. 

Only one person can receive child benefit but there is no limit on how many children you can claim for, and the allowance that you receive should be in your bank account every four weeks. 

Research institute highlights what the changes will mean

The Institute of Fiscal Studies (IFS) in response to the child benefit changes said that as parents will begin to lose child benefits at the higher ceiling of £60,000, it will mean that 170,000 fewer families are affected during 2024/25. 

It also said that the HICBC creates a particularly effective marginal tax rate for those who have several children, and while this will remain the same under the new system the impact of those tax rates will be lessened. 

The IFS has also called for a thorough reform of HICBC, as the current design enables families with the same combined income can be treated very differently depending on how a household's income is distributed. 

The government plans to address this issue and is looking to withdraw child benefits based on family income, as opposed to the income of the highest-earning parent from 2026. 

Currently, there is an ongoing consultation process over the potential policy, in order to combat any practical challenges that might happen. 

Of course, there is to be a general election this year and according to the polls the Labour Party is expected to win, so far it is unclear whether they would support the changes that the current government is looking to make. 

What is the relationship between child benefit and national insurance?

If you claim child benefit you can also claim national insurance credits which count towards your state pension, and can fill any gaps in your national insurance records. 

The credits can be claimed if you are not working, or do not earn enough to start making national insurance contributions. 

Two types of credits are available, the class 1 category can be placed towards your state pension and the New Style Jobseeker’s Allowance benefit which is a contributory system. 

While class 3 credits count towards your pension only. 

What should you do if family circumstances change?

Any changes to your family situation that could affect child benefit payments must be reported to the HMRC, if you do not you might be receiving all the money that you may be entitled to under different circumstances. 

There are many changing situations that the HMRC would need to know about, such as if your child is receiving universal credit or a job seeker’s allowance. 

Also if your child changes his or her name, moves in with a partner or in a more extreme circumstance goes missing. 

If your child leaves education after the age of 16 then the HMRC should also be contacted, and if a child is hospitalised for more than 12 weeks or enters into care or residential accommodation for longer than 8 weeks. 

Typically after this time has elapsed you are no longer entitled to child benefit. 

The Spring Budget is here! The Chancellor of the Exchequer Jeremy Hunt has outlined the Spring Budget and the highlights are outlined here.

Introduction

Mr Hunt started by addressing the "tragic loss of life in Israel and Gaza". And announces a £1 million memorial to be created in honour of fallen Muslims who died in both World Wars.

He highlighted the economic difficulties of the last 16 years from the 2008 financial market crashes.

Inflation

He notes the efforts they've made over the last 2-3 years will lead to more growth, more jobs and higher wages. And after some jibes attacking Labour's economic plans he follows up with the OBRs reporting that inflation which was at 11%, it is now at 4%. Today's forecast suggests that inflation will fall under 2% earlier than expected within the next few months.

Cost of Living Support

The Household Support Fund will be extended beyond 31 March and continue for 6 months.

In Autumn he froze alcohol duty until August 2024. He has now extended the alcohol duty freeze to Feb 2025.

The Fuel Duty cut has been maintained and frozen for another 6 months.

He also noted that one of the focuses today is on those falling into debt. He therefore has increased the repayment period for loans to cover household emergencies from 12 months to 24 months and an end to £90 charges for debt relief orders.

Debt & Deficit

Hunt then noted that there is no growth without solid finances. Highlights cutting deficit over last 14 years "by 80% between 2010 and 2019", amounting to £370bn they could then provide during the Covid-19 pandemic.

He says that the focus should be on reducing debt instead of borrowing. OBR announces debt will fall over the next 5 years. He says that today's forecasts show debt will fall to below to 94% by 2028 and 2029, down from over 100%.

He says that UK continues to have the lowest national debt in the G7, lower than Japan, France and the United States.

Turning to growth he notes that the OBR expects the economy to grow by 0.8% this year and 1.9% next year which is 0.5% higher than their autumn forecast. He adds that this is forecasted to continue at this level until 2027.

British ISA

He then announces the creation of a “British” ISA in the form of an extra £5,000 tax-free allowance for the public to invest exclusively in the UK.

Regional Investment

He then announces a large regional investment package in the North West a "North-East trailblazer devolution deal", a package worth over £100m.

He then announces further regional funding , and announces that he has allocated £188mfor projects in Sheffield, Blackpool and Liverpool. as well as £242min Barking Riverside and Canary Wharf.

VAT & Business investment

Hunt also increases the threshold for VAT registration will go up from £85,000 to £90,000.

Now moving to business investment he notes that "Business investment has risen from an average of 9.3% of GDP under Labour to 9.9% under the Conservatives. This year it will be 10.6% of GDP – generating £30bn more in business investment than if it had continued at Labour levels. And it is still going up," he says.

Energy

The secretary for energy security and net zero is investing up to £120m more to the Green Industries Growth Accelerator,

This is to build supply chains for new technology such as offshore wind and carbon capture.

Hunt also announces £270 million for advanced manufacturing industries, to fund car and space innovation.

Creative Industries

The chancellor confirms the Autumn Statement announcement that the rate of tax credit available to the industry will rise by 5% and an 80% cap for visual effects costs will be removed.

Hunt ensures that the tax reliefs just mentioned will become "permanent at 45% for touring and orchestral productions". For non-touring productions that relief will be one of 40%.

Medical Research, Healthcare & NHS

Hunt turns his attention to medical research. He is proposing an additional £45m investment with £3m put into cancer research.

He announces a brand new investment in to life sciences company AstraZeneca.

Hunt also announces an additional 650m investment in the Cambridge Biomedical Campus and a new vaccine manufacturing hub in Liverpool.

Childcare Plan

Hunt discusses the government's plans to address working vacancies and how to fill these gaps, using this to discuss their childcare plan. Previously, it was expanded to 30-hour a week of free childcare.

He announces a guarantee on the rates that will be paid to childcare providers to deliver the government's landmark offer for children over nine months old for the next two years.

Public Sector Productivity Plan

The investment needed to modernise NHS IT systems will cost £3.4bn - but will unlock £35bn of savings.

"And as a result of this funding, all hospitals will use electronic patient records, making the NHS the largest digitally integrated healthcare system in the world," he adds.

Smoking & Vaping Duties

Hunt has introduced a new levy on vaping.

There will also be a one-off increase in tobacco duty.

Air Passenger Duty

The government is increasing the Air Passenger Duty (APD) for business class travellers, Hunt announces.

Housing Tax Reforms

The chancellor says he will scrap tax breaks which make it more profitable for second homeowners to let out their properties to holiday makers as opposed to long-term tenants.

Hunt then announced that stamp duty relief for people buying more than one dwelling is being scrapped as the system was being taken advantage of.

Capital Gains Tax Cut

The higher rate of property capital gains tax is to be reduced from 28% to 24%, Hunt announces. He says the move is predicted to increase revenues as there will be more transactions.

Non-Dom Tax Reform

The government will abolish the current tax system for wealthy foreign residents in the UK who have non-domiciled tax status. By reforming this Mr Hunt says it will make the system "fairer and competitive". It will be replaced with a "modern residency system".

It will raise £2.1 billion with which the Conservatives will use to cut taxes.

Child Benefit Reform

Hunt says he will be reviewing the potential for a new rule on collective household income, rather than on an individual basis, which he aims to introduce by April 2026.

To help in the short-term, he will increase the threshold from £50,000 to £60,000.

And the top of the taper at which it is withdrawn will go up to £80,000.

Half a million families will save money as a result of this.

National Insurance Tax Cut

The chancellor announces a fresh cut to National Insurance contributions for employees from 6 April.

Hunt says he will reduce the rate by a further 2p, worth around £450 a year for someone on an average salary.

With Chancellor of the Exchequer Jeremy Hunt set to announce his Spring Budget on March 6th, we look into what we can expect from the UK's Spring Budget.

Tax Cuts

Mr Hunt has hinted at a series of tax cuts for the Spring Budget. Mr Hunt believes that the UK needs to reduce taxes as they are at the highest level since The Second World War. Speaking at the annual World Economic Forum in Davos, Switzerland, he said that countries with lower taxes have more "dynamic, faster-growing economies".

A key part of the Spring budget then will be tax cuts, but the question is how can these be paid for? The latest figures from the Office of National Statistics (ONS) had marked inflation remaining at 4%, which is still double the Bank Of England's target of 2%. With interest rates unlikely to be dropped until the summer in an ongoing attempt to reduce inflation, the cost of borrowing remains high. 

Therefore, Mr Hunt is unlikely to borrow money to pay for the tax cuts as we would be forced to pay these back with a higher interest rate, not to mention that Hunt himself said: "It is not Conservative to cut taxes by increasing borrowing because all you're doing is cutting the taxes paid by people today in exchange for increasing the taxes paid by our children tomorrow."

Cutting Inheritance Tax

One of the taxes regularly brought up as being cut or even scrapped is the inheritance tax. Currently, only 4% of the population is impacted by inheritance tax, but as house prices rise, and with inheritance tax thresholds frozen, it means more people are likely to pay this tax.

This policy is likely to be very popular with well-off Conservatives throughout the country, who will be able to pass on their wealth and assets more freely to future generations. However, it's likely to be very unpopular to those who fall outside of this, which is the vast majority of the country, who will likely see this as a tax cut for the rich, whilst the poorest in the country remain under a heavy tax burden.

Cutting Income Tax

There is also the potential for Income Tax to be cut. This cut, as well as a further potential cut to the National Insurance tax, could save your average pay-as-you-earn (PAYE) workers as much as £450. As reported by The Times "A 2p cut to income tax for someone earning £35,000 would leave them £448 better off a year while someone earning £60,000 would have an extra £948, according to analysis from AJ Bell."

"Meanwhile, a further percentage point cut to NI would leave a worker earning £35,000 a year £673 better off while someone earning £60,000 would be £1,131 better off."

"It sounds good, but such cuts are wiped out by the impact of frozen tax thresholds, known as fiscal drag. "

Cutting Spending

It seems likely that to pay for tax cuts, Mr Hunt would be either forced to cut public spending or find taxes that can be low impact, but still reduce the tax burden. On the BBC's Political Thinking Podcast, Mr Hunt said: "It doesn't look to me like we will have the same scope for cutting taxes in the spring Budget that we had in the Autumn Statement". 

"And so I need to set people's expectations about the scale of what I'm doing because people need to know that when a Conservative government cuts taxes we will do so responsibly and sensibly."

He added: "But we also want to be clear that the direction of travel we want to go in is to lighten the tax burden."

According to the Financial Times, sources close to Hunt have said that Treasury officials are considering “reducing projected spending rises to about 0.75 per cent a year, releasing £5bn-£6bn for Budget tax cuts.” 

Politics at play

With a General Election looming Mr Hunt and the Conservatives will be reticent of their current low standing in the opinion polls and will likely see tax cuts as one of the only potential routes to victory. In light of the UK's recession, Mr Hunt will be eager to grow the economy again and stop the current stagnation occurring in the UK's economy, which was one of Prime Minister Rishi Sunak's five pledges. 

With that being the case, the economy will be one of the Prime Minister's best weapons in winning back voters. They'll be hoping that by using the spring budget, they can use a series of tax cuts to grow the economy and boost their flagging opinion polls, which put them somewhere between 15-20 points behind the Opposition Labour Party.

The full interview with Jeremy Hunt from Political Thinking with Nick Robinson is available on BBC Sounds.

Tax hikes

Chancellor Rishi Sunak has unveiled a major tax hike in the 2021 budget – with corporation tax on company profits rising by 6% to 25% in 2023. Darren Upson, VP Small Business Europe at Soldo has commented: “While the Chancellor understandably needs to raise revenue to pay off the eye-watering amounts of cash borrowed throughout the course of the pandemic, we nonetheless worry about the timing of these tax hikes. In the context of Brexit, the government needs to ensure the UK remains an attractive destination for business. The last thing it ought to be doing is risking putting off investors and entrepreneurs with what may be perceived as a punitive tax regime. Another crucial concern is that these tax hikes may discourage SMBs from hiring. With unemployment creeping up, this move could ultimately prove to be counterproductive.”

Melissa Christopher, Executive Director at ZEDRA, argues the opposite:

”While the corporation tax rate increase is disappointing, it was inevitable that tax rises would happen and it primarily affects groups of companies that are profitable. The revised loss rules will help those companies who have struggled during the pandemic and will take a couple of years to recover.

“We rarely welcome tax increases, but tax certainty is helpful for international businesses as they plan their own budgets and revise business arrangements in the recovery period. The fact that the increase is not until 2023 will allow sensible business planning. No group should be making decisions on headline tax rates alone, and now is perhaps the best time to make reasoned and educated assessments of long-term expectations.

“International companies looking to expand to Europe will look at the UK as a successful economic location, with a motivated and educated workforce, and a stable business environment; the latter is particularly crucial in these turbulent times. 

The extension of the furlough scheme

“The Chancellor’s decision to extend furlough [until September] will be hugely welcome for firms who’ve continued to struggle through this latest lockdown, but this solves just one part of a much bigger problem.

“Many workers being kept on the scheme will now be feeling huge financial and mental strain resulting from prolonged job insecurity and reduced pay, meaning businesses taking advantage of the extension need to have robust support in place for this section of their workforce. Even if you already have a benefits and wellbeing strategy in place, it’s well worth reassessing people’s current needs and priorities, as it’s more than likely you’ll find certain resources could be better utilised moving forward.

“The Prime Minister’s roadmap out of lockdown put the return of ‘normality’ firmly on the horizon, so when we eventually make it through the other side it will be just as important to have measures in place to support employees through the lasting effects of the pandemic. Workers have been incredibly loyal during a tough year, so these decisions should not be taken lightly.”

-Steve Bee, Director of WorkLife by OpenMoney

The extension to the stamp duty holiday and introduction of a government-backed 5% mortgage

“The Chancellor’s decision to extend the Stamp Duty Land Tax (SDLT) holiday and provide a Government-backed guarantee to mortgages with deposits of just 5% reflect the importance of maintaining optimism in the UK housing market. This level of support shows that the government continues to view the housing market as key to the UK economy at a time when the latest Nationwide House Price report confirmed that demand from buyers is being sustained.”

-Tom Brown, Managing Director of Real Estate at Ingenious

Help to Grow

“We applaud the government’s new £520m Help to Grow scheme, which aims to help small and medium-sized businesses boost their productivity. It’s particularly exciting to see the digital element of this, with the offer of technology advice and discounted software. This is exactly the kind of creative thinking required to get businesses back on their feet.

“It’s good to see the government offering guidance and channelling resources towards a specific and sensible direction, rather than simply throwing money at businesses and hoping for the best. It’s clear that digitisation and cloud-based operational models are the way of the future, and businesses that don’t embrace this are going to have a difficult time competing in the post-COVID era. Finance decision-makers, in particular, ought to use this ‘great pause’ to reassess their business and payments strategy, ensuring that these are fully optimised for life beyond the lockdown.”

-Darren Upson, VP Small Business Europe at Soldo

The £100m investment in the HMRC taskforce

“This is a positive announcement by the Chancellor and more than 1,000 new investigators may go some way to recouping the £billions which have been lost to fraud over the past 12 months of the coronavirus crisis.

“There’s no doubt that extra resources are much in need, particularly as the Chancellor has also announced a new Restart fund for businesses to replace the Bounce Back loans, which was wide open to fraud.

“But it’s also vital that a significant amount of that £100m investment goes into the systems used by HMRC to find those responsible for fraud. Without the use of the latest digital platforms to run ID checks and verify information on a global scale, these investigators will be in danger of just becoming busy fools.”

-John Dobson, CEO at AML specialists SmartSearch

The wider implications for the FinTech industry

“In the face of adversity, the UK FinTech industry has proven its resilience, attracting $4.6bn in VC investment last year despite the challenges and uncertainty caused by the pandemic. But safeguarding this growth and establishing the UK as a world leader in FinTech will require us to cultivate an attractive and prosperous environment for talent from all walks of life. 

The Chancellor’s ‘fast-track’ FinTech visa is a welcome step in the right direction and there’s no doubt that the Kalifa Review signals a commitment to long-term investment. However, true innovation comes through diversity of thought and background, and as a migrant myself, the budget was missing this final piece: a reassurance to foreign talent that there is a home for them in the UK FinTech community.”

-Daumantas Dvilinskas, CEO and Co-Founder, TransferGo

Contactless payment limit

“The single contactless limit for credit and debit cards will rise to £100, and cumulative contactless payments up to £300 (before the need for consumers to input their chip and pin). This change may cause a divide among consumers, some may celebrate the change whereas others could now be concerned about over-spending or fraud. It is wise for customers to keep a close eye on where their money goes and be aware of when they will be required to use their pin. Peace of mind is a definite benefit when using a credit card for shopping, either in-store or online, as consumers are protected under Section 75 of the Consumer Credit Act for payments of £100 or more. If shoppers struggle to pay back their balance, they would be wise to hunt down a decent interest-free credit card for extra breathing space to tackle the debt.”

-Rachel Springall, Finance Expert at Moneyfacts.co.uk

What was missing?

“In a number of ways, the budget did not have the sharp teeth so many feared. There was no mention of a wealth tax, no wholesale reform to the inheritance tax regime, no sign of the increases in Capital Gains tax that were thought inevitable and an extension to the SDLT holiday. That is not to say that the door has now closed on these changes; in fact, we think it remains wide open and that the Chancellor will turn his attention to some of them in due course. 

“It is also interesting to see the government’s forecast for inheritance tax receipts for the coming year has, for the first time, reached £6 billion. With this news and the OTS’ most recent report on the subject in hand, it remains an area we believe that is due for significant reform in the coming couple of years.”

- Tim Snaith, Partner at Winckworth Sherwood

One in six small businesses (17%) is planning to employ new staff by the end of April 2017 – with the IT & Telecoms sector leading the employment charge (27%) -– according to the new research from Hitachi Capital’s quarterly British Business Barometer.

The new Hitachi Capital Business Finance data comes as the Federation of Small Businesses has urged The Chancellor of the Exchequer Philip Hammond to boost jobs and long-term growth in the forthcoming Spring Budget. The new Hitachi Capital data suggests many SMEs already plan to hire new staff before April: the areas where they could do with Government support relate to keeping fixed running costs and business rates down.

Beyond being financial growth drivers for the economy at large - and an ongoing source of ideas and innovation - the UK’s small businesses are vital drivers for employment and training to the British economy. The new research by Hitachi Capital Business Finance revealed the younger the small business the more likely it was to be hiring. One in five SME decision makers (20%) from enterprises less than five years old plan to hire new people by April. In contrast, businesses over 35 years are the least likely to be hiring (13%).

For eight of eleven regions polled, typically around one in six small ventures were planning to expand their headcount in the next three months – with London, the South East, North West and Scotland driving activity.

Regional employment over the next three months

By sector, the divergence between regions most and least likely to employ new staff were more pronounced – the biggest opportunity sectors being IT & Telecoms, Financial Services, Manufacturing and Medical.

Employment over the next three months by sector

Gavin Wraith-Carter, Managing Director at Hitachi Capital Business Finance comments: “The Spring Budget is an opportunity for the Chancellor to openly support the growth ambitions of SMEs and the positive contribution they make to the UK economy at large. Many small business owners are concerned about the impact of a steep rise in business rates and have placed importance on cutting fixed costs and better managing cashflow and invoicing to keep their business plans on track.

 “On a positive note, our Spring research suggests that many SMEs are adjusting quickly to Brexit, looking for new markets to expand into and fresh methods to drive growth – and many intend to increase headcount to support these plans. This week’s Budget is a great opportunity for the Government to reaffirm its support for the sector at a critical time.”

(Source: Hitachi Capital Business Finance)