Budget at-a-glance: From pensions to childcare, what it means for you

Chancellor Jeremy Hunt has announced changes to pensions, utility bills, childcare and more in today’s spring budget.

The main announcement was the abolition of lifelong pension benefits, in an effort to keep more people working longer.

It means that pension savers don’t have to pay tax penalties on the money they put aside for retirement – no matter how big their pot gets. Before today, they would be taxed if their pot rose above £1.07m.

Hunt also promoted free childcare and extended the energy price guarantee for a further three months, limiting the average household’s energy bill to £2,500 through August.

We explain all the important announcements and what they mean for your finances.

Lifetime pension benefit abolished

Jeremy Hunt has given high-earning savers a huge boost by abolishing lifelong retirement benefits.

The limit placed a cap on the amount people can have in their retirement pot without facing tax penalties when they withdraw it.

It should have stayed at £1.07m until 2026, but now the cap has been abolished altogether.

The government is doing everything it can to make it worthwhile for people to stay in work, especially for doctors and civil servants who are leaving early in large numbers.

It means that high-income retirees no longer have to pay tax on savings they have set aside for retirement over their lifetime.

> What the change in lifelong allowance and annual allowance means for you

Annual increase in pension benefits

In addition, the annual pension allowance has been increased by £20,000, from £40,000 to £60,000 – a 50 per cent increase.

The annual allowance is the standard amount that people can contribute to their pension each year and are eligible for tax relief. It includes your contributions, your employer contributions and tax relief.

The rules are more complicated for higher incomes, whose annual allowance is ‘tapered’.

> How the annual allowance changes

Training for older workers

To get the over-50s back to work, Hunt is proposing a new internship-like program he called “returnerships.”

He said this would train people over 50 for new roles in sectors where there are shortages, such as technology.

The government hopes this will entice early retirees to return to work to fill shortfalls it says are hampering economic growth.

Energy price guarantee extended until the end of June

The government has extended the energy price guarantee for another three months. This means the energy bill for a typical household will be capped at £2,500 until the end of June.

According to the Treasury, this equates to a reduction in energy bills of £160 for households with typical levels of energy consumption, on top of measures already taken.

The price cap then goes up to £3,000 from July. Wholesale prices for gas and electricity have been falling steadily since December 2022, but that drop has not yet been passed on to energy bills. However, homeowners can expect to see them fall later this year.

It’s worth noting that while the guarantee has been extended, the £400 winter discount households have received since October has not been extended and will end on April 1.

There was also welcome news for those with prepaid electricity meters. Hunt confirmed that they will no longer pay higher rates for their energy than those for direct debits, ending what he called the “poorest household premium.”

> Will your energy bill go down or up? What the price guarantee freeze means

Incentive for working parents: The government has pledged to cover childcare costs for children under three for up to 30 hours a week

Childcare costs for children under the age of three

After much focus on the cost of childcare and the impact it has on keeping new parents out of work, the chancellor has announced free childcare for children under three as one of his measures to get back to work. However, the measures are being introduced in phases so as not to overwhelm providers with demand.

The government has pledged to pay for 30 hours of free childcare for children over nine months old, on top of the existing system for three-year-olds.

The announcement is expected to cost the government around £4 billion in additional funding.

In addition, Hunt increased the hourly rate paid by the government to childcare providers and raised the minimum child ratio from 1 to 5 from 1 to 4.

In addition, to encourage more people to join the childcare profession, new members will receive incentive payments of £600, rising to £1,200 for those who join through an agency.

In a further move to support parents, those with universal credit will see their childcare allowance increase and they will be paid up front.

> Get 30 hours of free childcare: Budget shake-up explained

Freeze fuel tax

The government has opted to freeze excise duty on fuel for another year, maintaining the 5p cut introduced last year due to high prices. The move will save the average driver £100 over the next year.

It is clear that the Treasury was previously looking at raising petrol prices by around 11p a liter later this year.

The cost to the government of freezing it at current levels is estimated to be around £6bn.

> Fuel duty frozen for 13th year: how much petrol and diesel is tax

Duty to drink: The Wine and Spirit Association says today’s hike is the ‘biggest wine tax hike in the past 50 years’

Increase in alcohol tax

The excise tax on alcohol will increase from August in line with retail price index inflation, and a new regime will also come into effect whereby drinks will be taxed according to their alcohol content.

The increases were announced in 2021, but implementation was delayed by six months to August 2023. The government has now confirmed there will be no further delays.

According to the Wine and Spirit Trade Association, it is the largest tax increase on wine in the past 50 years.

However, Hunt said that from August 1 the excise duty on draft drinks in pubs will be up to 11p lower than the cost in supermarkets.

> Cheers Jeremy! ‘Brexit pubs guarantee’ lowers tax on pints

Pothole fund to repair UK roads

In a win for the Daily Mail’s potholes campaign, the Chancellor has announced an additional £200 million fund to repair Britain’s craters. The commitment means that about four million more holes will be filled.

The money represents a boost of nearly a fifth of annual funds to repair crumbling rural and local routes, and will be released to councils across England in the coming weeks.

As the money is earmarked for town halls, it means residential streets, country lanes and smaller B and C roads should benefit.

Corporate Tax Breaks: While Hunt has ended the “super deduction” scheme, he has introduced full corporate capital expenditures for the next three years.

Corporate income tax increases and corporate tax cuts

The corporate tax rate for businesses will still rise from 19 percent to 25 percent from April, despite significant opposition from the Conservative backbenches.

But Hunt says new corporate tax breaks will cushion the blow, largely in the form of full capital expenditures.

Rishi Sunak’s ‘super deduction’ scheme expires this month. The scheme allowed some companies to deduct up to 130 percent of costs from pre-tax profits and a special rate of 50 percent for the first year that allows you to deduct 50 percent of costs from your pre-tax profits.

Now the government has introduced full corporate capital spending for the next three years, intending to make it permanent once it is ‘responsible’ to do so.

It means that any money a company invests in IT equipment, installations or machines can be deducted ‘in full and immediately’ from its taxable profit.

The government says it is saving £9bn a year for businesses and business investment is expected to grow by 3% a year.

And as an incentive for innovation SMEs, they can claim £27 in credit for every £100 they spend, if they spend 40 per cent or more of their total spend on research and development.