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The British economy will contract this year but will avoid recession, said Chancellor Jeremy Hunt in his Budget speech.
Until now, the economy has seemingly followed a path to shrink.
But after examining the Chancellor’s Budget plans and the broader global economy, the independent Office of Budget Responsibility (OBR) considers the country will now avoid plunging into the red even though the size of the UK economy will fall by 0.2 per cent by the end of the year.
A recession is when an economy posts two-quarters of declining growth.
The best news from Hunt’s hour-long speech to Parliament was inflation would collapse from 10.9 per cent posted in December to 2.9 per cent by the end of the year.
Table of contents
No Tax Giveaways
His Budget offered little in the way of new investment or tax cuts but more of sticking plaster funding here and there, leaving many asking if they are better or worse off than before.
The overarching theme was getting people who want to work back in employment by beefing up financial help with benefits and child care.
New funding called Universal Support is offered to assist 50,000 disabled people in getting work.
The Chancellor is also expanding free childcare for working parents to include children between nine months and two years old.
Some crumbs were thrown at families struggling with the cost of living.
Tax Not Mentioned
Energy bill help worth £160 for every household will continue until the end of June, while duties on fuel and the price of a pint are frozen.
However, the devil is in the details, and the Chancellor failed to mention changes that will hit higher rate taxpayers from April 6.
From April, the threshold that triggers higher rate income tax changes, capturing more earners in the net:
| Band | Threshold 2022/23 | Threshold 2023/24 | Tax rate |
| Personal allowance | Up to £12,570 | 0% | |
| Basic | £12,571 – £50,270 | 20% | |
| Higher | £50,271 – £149,999 | £50,271 – £125,139 | 40% |
| Additional | £150,000+ | £125,140+ | 45% |
How CGT Will Change
Altering the thresholds means that as more earners pick up pay rises, they move into a higher bracket, paying an increased amount of tax. Hunt explained in his autumn statement last year that these thresholds would stay in place until April 2026.
Around one in four workers earns more than £50,000, which has steadily risen since 2010, while average pay is £33,280.
Income tax thresholds are not the only tax change.
Capital gains tax personal allowances are almost phasing out. The current allowance of £12,300 nosedives to £6,000 from April 6 and then £3,000 from April 2024.
This measure hits expat landlords selling a UK home in the pocket.
Pension Saving Limits Scrapped
For working expats with a defined contribution (DC) private pension, the Chancellor has decided to increase the annual allowance by 50 per cent, taking the cap up from saving £40,000 a year into a pension to £60,000.
For retirement savers already drawing on a private pension, the Money Purchase Allowance sets the amount they can save each year. This rises from £4,000 a year to £10,000.
High earners with fully-funded private pensions will be glad to see the lifetime allowance scrapped from April 6, 2024.
The LTA is currently £1.073 million and was due to stick at that amount until April 2026. Hunt has decided to abolish the limit to encourage hospital consultants to stay in their posts. Many have retired from the National Health Service to avoid a 65 per cent tax penalty if their pension fund exceeds the LTA.
QROPS Unchanged
Expats with money in the Qualifying Recognised Overseas Pension Scheme – offshore pensions tailored for expats – can expect business as usual, with no apparent changes on the way.
The LTA and annual allowance do not apply to QROPS. The LTA is only considered when moving money from a UK fund to an overseas pension – once it’s arrived, the LTA does not apply.
Other tax changes buried in the Treasury documents explaining the Budget include new rules for declaring crypto assets on self-assessment tax returns and keeping the ISA annual investment limit at £20,000.
Read Chancellor Jeremy Hunt’s full speech
Find out more about Budget 2023 on the Treasury website
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For retirement savers already drawing on a private pension, the Money Purchase Allowance sets the amount they can save each year. This rises from £4,000 a year to £10,000.