We have now seen the detail of the chancellor’s first Budget and the clear focus has been on getting those who can back to work – but will the changes help bridge the gap in the employment market?
Our initial reaction is that it’s unlikely to provide meaningful incentives to those who plan to go back to work. The freeze on income tax rates and allowances will mean that any increases in wages over the next couple of years, particularly for those near a change in rate band, will be eroded by increased taxes.
The relaxation of the pension allowances will provide some comfort to high earners in the NHS though. They had previously been hit by annual pension allowance charges. The annual allowance has been increased to £60,000 per year and should provide some incentive for senior clinicians to increase their workload.
However, for business owners, the pension freedoms introduced in 2016 have created a situation where a pension is the most efficient structure for inheritance tax planning, as the fund can both grow in a tax-free environment and potentially also be passed on as a quasi-trust fund for future generations. It may be that the changes to pension allowances will most benefit entrepreneurs and company owners who have more flexibility over their remuneration strategy and can potentially fully fund their pensions whilst also managing their other income to fully utilise their tax allowances.
The other group targeted to encourage a return to the workplace is new parents, as there is often a stark choice of either working to afford to send their child to nursery, or to take a career break, usually until the free childcare places commence at age three, or until the child starts school. The government has committed to 30 hours free child places for all children from nine months old and support to childcare providers to help fund new places.
Whilst the phasing of these new proposals will hopefully provide some assistance for nursery owners, there is likely to be a significant increase in the number of parents wanting to take up free child places. There is pressure already on childcare providers, and with a likely sudden increase in demand, could this cause a crisis in the childcare sector?
Again, although free child places will provide help for all new parents, this is out of step with other policies such as the high income child benefit charge, which is restricted for parents who have one higher rate taxpayer and the tax free childcare scheme which tapers for any individual earning over £100,000. It is likely that the funded childcare places will need to operate through the same system as those for over three’s and provides another layer of complexity and rules for parents to access support to enable them to return to work.
Home >Articles > Spring Budget 2023: how did the Budget help people back to work?
Spring Budget 2023: how did the Budget help people back to work?
We have now seen the detail of the chancellor’s first Budget and the clear focus has been on getting those who can back to work – but will the changes help bridge the gap in the employment market?
Our initial reaction is that it’s unlikely to provide meaningful incentives to those who plan to go back to work. The freeze on income tax rates and allowances will mean that any increases in wages over the next couple of years, particularly for those near a change in rate band, will be eroded by increased taxes.
The relaxation of the pension allowances will provide some comfort to high earners in the NHS though. They had previously been hit by annual pension allowance charges. The annual allowance has been increased to £60,000 per year and should provide some incentive for senior clinicians to increase their workload.
However, for business owners, the pension freedoms introduced in 2016 have created a situation where a pension is the most efficient structure for inheritance tax planning, as the fund can both grow in a tax-free environment and potentially also be passed on as a quasi-trust fund for future generations. It may be that the changes to pension allowances will most benefit entrepreneurs and company owners who have more flexibility over their remuneration strategy and can potentially fully fund their pensions whilst also managing their other income to fully utilise their tax allowances.
The other group targeted to encourage a return to the workplace is new parents, as there is often a stark choice of either working to afford to send their child to nursery, or to take a career break, usually until the free childcare places commence at age three, or until the child starts school. The government has committed to 30 hours free child places for all children from nine months old and support to childcare providers to help fund new places.
Whilst the phasing of these new proposals will hopefully provide some assistance for nursery owners, there is likely to be a significant increase in the number of parents wanting to take up free child places. There is pressure already on childcare providers, and with a likely sudden increase in demand, could this cause a crisis in the childcare sector?
Again, although free child places will provide help for all new parents, this is out of step with other policies such as the high income child benefit charge, which is restricted for parents who have one higher rate taxpayer and the tax free childcare scheme which tapers for any individual earning over £100,000. It is likely that the funded childcare places will need to operate through the same system as those for over three’s and provides another layer of complexity and rules for parents to access support to enable them to return to work.
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