Yesterday's budget announcement by chancellor Jeremy Hunt included quite a few changes that will affect workers across the country. From adjustments to the personal tax allowance to alterations in National Insurance contributions, the new budget is designed to address the nation's ongoing economic challenges. Let's take a look at some of the main aspects of the budget and how they may impact employees...
The personal tax allowance - the amount of income that you can earn before paying income tax - will remain frozen at £12,570 for the 2023-2024 tax year. This freeze means that employees may end up paying more in taxes if their salaries increase, given that the tax-free threshold remains unchanged.
The chancellor has confirmed an increase in National Insurance contributions (NICs) for both employees and employers. The employee NIC rate will rise by 1.25%, while the employer rate will increase by the same amount. This change will have a direct impact on take-home pay, as a higher proportion of your salary will go towards National Insurance.
The budget introduced changes to the pensions lifetime allowance, which is the total amount individuals can save in their pension without incurring additional taxes. This allowance will be frozen at £1,073,100 for the 2023-2024 tax year, potentially affecting higher earners who may exceed the limit and face additional tax charges.
The chancellor has introduced a new childcare support initiative to help working parents. This initiative will provide 30 hours of free childcare per week for eligible two-year-olds, in addition to the existing 30-hour offer for three and four-year-olds. This additional support is designed to reduce the burden of childcare costs for working families, so that parents can return to work more easily.
The government has also taken steps to relieve the pressure of rising costs on employees. The budget includes a reduction in fuel duty by 5p per litre, which will help reduce costs for those who drive to work. Additionally, the government has pledged £500 million towards energy efficiency grants to help households lower their energy bills.
The budget outlined a new £1.6 billion investment in skills and training programmes aimed at boosting job opportunities and career progression for employees. This investment will provide funding for apprenticeships, technical education and work-based training, creating more opportunities for people to gain valuable skills and qualifications.
The UK budget for 2023 brings both challenges and opportunities for employees. While the freezing of personal tax allowances and increased National Insurance contributions may result in reduced take-home pay for some, the government's commitment to childcare support, skills development, and reducing the cost of living aims to alleviate some of the financial pressure on working families.