On 15 March, the Chancellor of the Exchequer, Jeremy Hunt, delivered the Spring Budget 2023, which is being labelled as the “back-to-work” budget, with an emphasis on improving the economy, building out the workforce and incentivising people to return to work and for longer.
Key employment and pensions related announcements include the following:
Pension Tax Thresholds
As predicted, the Chancellor announced a number of changes to the pension tax thresholds. From 6 April 2023, the tax-free annual pension allowance will be increased from GBP40,000 to GBP60,000 per year (the ability to carry forward unused annual allowance from the previous 3 tax years has also been retained).
The minimum tapered annual allowance has similarly been increased from GBP4,000 to GBP10,000 with the adjusted income threshold for the tapered annual allowance increasing from GBP240,000 to GBP260,000.
Finally, the lifetime allowance charge will be removed from 6 April 2023 (with the lifetime allowance (currently GBP1,073,100) fully abolished in a future Finance Bill). The maximum pension commencement lump sum for those without protections will, however, be retained at its current level of GBP268,275 and will be frozen thereafter.
Enterprise Management Incentives (EMI)
From April 2023, the requirements for a company to (a) set out details of share restrictions within EMI option agreements and (b) declare that an employee has signed a working time declaration, will be removed. Furthermore, from April 2024, the deadline for a company to notify HMRC of the grant of an EMI option will be extended from 92 days following the grant of the option, to 6 July following the end of the tax year. This should provide greater flexibility for companies who operate EMI schemes and encourage their use more broadly in the employment landscape.
Benefits in Kind
The government has emphasised its long-term strategy to simplify the tax system for taxpayers and their agents. With this in mind, the Chancellor announced that it will deliver IT systems which will enable tax agents to payroll benefits in kind on behalf of employers. The hope is that this will reduce the burden on employers and allow agents to support their clients more effectively.
Should you have any queries on the Spring Budget, please reach out to your usual UK tax contact or one of the above authors.