According to the recently announced 2023 budget, the UK will not enter a technical recession this year, and inflation will fall to 2.9% by the end of the year.
Chancellor Jeremy Hunt has proposed reforms in a number of areas, including childcare, pensions, and disability benefits. Here are the key highlights:
Parents working 16 hours a week with children aged nine months to five years will receive 15 hours of free childcare to encourage carers to enter the workforce. To ensure adequate capacity, the programme will be phased in beginning in April 2024, with children up to two years old receiving 15 hours of free childcare beginning in April 2024 and children nine months and older benefiting beginning in September 2024. Every working parent with a child under the age of five will have access to 30 hours of free childcare per week by September 2025. According to Hunt, this will save families nearly 60% on childcare costs.
The lifetime allowance, which is the maximum amount of pension savings a worker can accumulate before having to pay additional tax, has been eliminated. The annual tax-free allowance for pensions will also be increased by 50%, from £40,000 to £60,000. Hunt hopes that these reforms will prevent 80% of NHS doctors from being taxed.
The work capability assessment for disabled people will be phased out, and benefit entitlement will be divorced from an individual's ability to work. The goal is for disabled people to be able to work without fear of losing their benefits. A new programme called universal support will provide additional assistance to disabled people in finding work.
Other notable reforms include the establishment of a new apprenticeship, known as a returnership, for people over the age of 50 who want to return to work. An additional £400 million will be allocated to improve mental health and musculoskeletal workplace support in order to reduce sick leave. Furthermore, corporation tax on profits over £250,000 will increase from 19% to 25% in April, but businesses will be able to deduct 100% of their UK investments from their profits to reduce tax bills.
While the proposed reforms by the government will benefit many citizens, they will come at a cost. According to Treasury estimates, relaxing pension tax allowance rules will cost more than £1 billion by 2026-27. Furthermore, the tax burden as a share of GDP is on track to reach its highest level since World War II. Nonetheless, the government believes that the reforms will stimulate business, increase investment, and assist families with childcare and pension costs.
Felix is the founder of Society of Speed, an automotive journal covering the unique lifestyle of supercar owners. Alongside automotive journalism, Felix recently graduated from university with a finance degree and enjoys helping students and other young founders grow their projects.