The UK government recently announced changes in pensions, childcare, universal support scheme, and employee share plans, among others, as part of the Spring Budget 2023 to remove obstacles to participation in the workforce.
Increasing tax-effective savings opportunities
- Removing the Lifetime Allowance (“LTA”) from 6 April 2023 before completely abolishing it from April 2024 under a future Finance Bill. The LTA represents the maximum amount someone can save in a registered pension scheme over their lifetime without incurring a tax charge.
- Increasing the Annual Allowance (“AA”) from GBP 40,000 to GBP 60,000 from 6 April 2023. The AA represents the maximum amount someone can save in a registered pension scheme each year without incurring a tax charge.
- Increasing the Money Purchase Annual Allowance (“MPAA”) from GBP 4,000 to GBP 10,000 from 6 April 2023. The MPAA represents reducing the amount someone can save in a registered pension scheme without incurring a tax charge and is triggered by taking money “flexibly” from a defined contribution pension scheme.
- Increasing the minimum Tapered Annual Allowance (“TAA”) for high earners from GBP 4,000 to GBP 10,000 and the adjusted income threshold for TAA from GBP 240,000 to GBP 260,000 from 6 April 2023. The TAA represents the gradual reduction of the amount someone can save in a registered pension scheme each year, depending on their earnings.
- Capping the maximum Pension Commencement Lump Sum (“PCLS”) for those without relevant protections at GBP 268,275 (25% of the LTA) and freezing it thereafter. The PCLS represents the tax-free cash that someone can access from a registered pension scheme on retirement. Those who already have enhanced tax protections will continue to have them.
- Providing 30 hours of free childcare per week for 38 weeks of the year (outside of the school term for school-age children) for working parents with children over the age of 9 months. This will be introduced in stages: 15 hours of free childcare per week for working parents of children aged two years from April 2024, 15 hours of free childcare per week for working parents of children aged nine months to 3 years from September 2024, and 30 hours of free childcare per week for all working parents with children over the age of 9 months from September 2025. To be eligible, both parents should be working over 16 hours a week, each earning less than GBP 100,000 a year.
- Increasing wraparound care to support the expansion of school-based childcare availability for parents of school-age children.
Universal work support scheme
- Launching a new voluntary employment scheme called “Universal Support” for people with disabilities and long-term sickness, that will be funded in England and Wales. The government will spend up to GBP 4,000 per person to help 50,000 people per year land a suitable job, streamline access, and set up support systems. This will include, for example, the abolishment of the Work Capability Assessment, a poor-performing test to assess a person’s capability for work within the UK benefits system.
Employee share plans
- Simplifying the process to grant options under the Enterprise Management Incentives (EMI) scheme by removing the requirement for a company to set out details of share restrictions in EMI option agreements or declare that an employee has signed a working time declaration. These changes will take effect from 6 April 2023 and will apply retrospectively to all options granted before that date but not yet exercised.
- Extending the deadline for notifying HM Revenue & Customs (“HMRC”) of an EMI grant from 92 days post-grant to 6 July following the end of the tax year of the grant. Failure to notify HMRC of a grant in due time results in the disqualification of EMIs awarded under that grant from tax-favorable treatment. This change will take effect from 6 April 2024.
Tax agents’ access to payroll
- Providing government IT systems to enable tax agents to payroll Benefits in Kind on behalf of employers. This is introduced as part of the government’s long-term goals to simplify the tax system for taxpayers and tax agents and alleviate the burden on employers.
Cost of living assistance
- Extending the Energy Price Guarantee until the end of June 2023 to assist with inflationary pressure and to limit energy bills to GBP 2,500 per year.
- Announcing GBP 406 million to tackle health issues focusing on mental health, musculoskeletal conditions, and cardiovascular diseases. Measures will include increasing the availability of resources, expanding the placement and support scheme for individuals, and scaling up musculoskeletal hubs in the community.
- Expanding the occupational health subsidy pilot scheme to support Small- and Medium-Sized Enterprises (“SMEs”) with the cost of purchasing occupational health services.
- Launching a consultation on how to improve the availability of occupational health supports provided by employers.
- Launching a consultation on options to increase investment in occupational health services by UK-wide employers through the tax system.
- Launching a new type of apprenticeship called “Returnerships” for workers over the age of 50 to provide them with the necessary skills and support to reenter the labor market. To encourage and facilitate worker uptake, the returnerships will be offered alongside skills bootcamps and sector-based work academies. Employers would need to consider the details of returnerships, including the type of contract and the pay and benefits that are offered to such workers.
- National Insurance contribution thresholds will be frozen until April 2028. The increase of 1.25% in effect since April 2023 has been reversed from 6 November 2022.