UK Chancellor Jeremy Hunt has now unveiled his 2023 Budget, but is it good news for your personal finances? This post will explain all…
It’s no secret, the economy is in a poor state and many are struggling with their finances at the moment. Without a magic wand, it would be near impossible to fix these problems overnight. So do temper your expectations.
However, the 2023 Budget did have some glimmers of hope for your personal finances, which will be detailed below.
Picture credit: HM Treasury
In this post I’ll cover:
- Energy Bills
- What the 2023 Budget means for motorists
- General economy outlook
Energy bills is one area where the 2023 Budget delivered good news for your personal finances.
The Chancellor announced the Energy Price Guarantee will remain at its current cap of £2,500 for the typical household for the next three months.
He said this will save the average family an extra £160 on top of support measures already announced.
This band of measures will see you through till July, which should cover the worst of the high prices. Energy prices are expected to fall significantly from July and with – hopefully – warmer temperatures and longer evenings will reduce your energy needs.
Many of you may not be overly worried about your pensions just yet. However, these will be invaluable in years to come.
For this reason, the Chancellor’s plan to increase the annual tax-free allowance from £40,000 to £60,000 in the 2023 Budget could be good news for your personal finances.
Additionally, he has abolished the Lifetime Allowance for pensions, which was previously set at £1.07 million.
This will be particularly welcomed by many NHS doctors who found themselves falling foul of tax rules in their pensions.
Given the precarious nature of the State pension, if you can take advantage of this tax break, it may well be worth your while.
There were three key announcements in regard to childcare in the 2023 Budget.
Firstly, any new childminder will receive an incentive payment of £600, rising to £1,200 for those that join through an agency. This could be worth considering if you’re looking for some new work.
Secondly, for those receiving Universal Credit, childcare costs will now be paid upfront instead of in arrears.
Families will now be able to claim £951 for 1 child & £1,630 for 2 children.
Finally – and this is the big one – working families will have access to 30 hours free childcare per week for children aged between 9 months and 4 years. Previously, this was only available once the child reached three years of age.
However, there are limitations to this support. It only applies in school term times and both parents (if in a two parent household) have to be working a minimum of 16 hours a week.
Overall, this appears to be a really positive step for working parents and particularly women who have disproportionately been affected by the cost of childcare.
What the 2023 Budget means for motorists
Fuel duty will be frozen and a 5p reduction will be maintained for a further year.
This is a positive step and will cost the government around £6 billion. However, the average driver will only save about £100 in the year.
Petrol and diesel costs are still very high, so sadly motorists may still struggle in the year ahead.
General economy outlook
The current economy is not in good shape. In fact, the UK is the only G7 economy which is still smaller than it was before the Covid pandemic, despite the economy growing 4% in 2022.
This year, the economy is expected to shrink by 0.2% this year to avoid a technical recession. Essentially, this means there won’t be two quarters of negative growth. This probably will have little impact on your personal finances.
The outlook is expected to improve. The economy is forecast to grow by 1.8% in 2024 and 2.5% in 2025, according to Office for Budget Responsibility.
Inflation is also forecast to fall from 10.7% last year to 2.9% by the end of this year, which would bring some much needed relief to many of us.
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