The 2023 budget – what can we expect

Chancellor Jeremy Hunt is preparing to share his first full Budget this week.

Amidst the need to balance the economy and a looming deficit there is much speculation about what could be announced and how far the government plans to go against a backdrop of an upcoming general election.

Chartered financial planner David Bolton shares their thoughts on what we can expect.

Given the need for stability it is unlikely that the Chancellor will be announcing any significant tax cuts.

Increasing state pension age

The current point at which men and women can start to draw their state pensions is 66. This is due to gradually increase to 67 between 2026 and 2028, and to 68 from 2044-2046.

Reports suggest that Hunt will recommend that the increase to 68 be moved forward to the mid-2030s. If true, it would mean millions of workers born in the 1970s would have to push back their retirement plans.

Rise in tax-free pension allowance

The chancellor is also expected to increase the £40,000 annual cap on tax free contributions to pensions.

He could also raise the lifetime allowance – the amount you can accumulate in your pension pot before facing extra tax charges.

New tax breaks for businesses

According to the Financial Times, Hunt will set out a new tax break regime for businesses as he seeks to encourage investment.

The aim is to help offset the planned 6% rise in corporation tax and the end of the “super-deduction” scheme this month, which gives companies generous tax deductions on money invested in equipment and machinery.

Reducing capital gains tax (CGT)

The rates of capital gains tax rates (CGT) have remained the same since 6 April 2017, although it has already been announced that the CGT annual exemption will reduce from £12,300 to £6,000 from April 2023, and then to £3,000 the following year.

This significant reduction in CGT and dividend allowances will drag many investors into both paying more tax and self-assessment but additional changes to CGT remain to be seen.

Also expected

There is also some speculation of an extension to the 5p fuel duty cut for another year and a new tax on energy bills from 2025. There are also calls for a simplification of the tax-free childcare scheme.

To that end, we should expect an update on the intentions to halve inflation, grow the economy and reduce public debt over the coming years, which will enable tax reduction in the future.

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THIS ARTICLE REPRESENTS THE VIEWS OF THE ADVISER AND DOES NOT CONSTITUTE FINANCIAL ADVICE.