Spring Budget 2023: What was announced and what does it mean for you?
On the 15th March 2023, the chancellor Jeremy Hunt presented his first budget. With inflation, interest rates and utility bills on the rise, many Britons were hoping he’d unveil elaborate plans to curb living costs and leave more money in ordinary people’s pockets.
But did his budget live up to expectations? It has some promising developments for working parents and households struggling with energy costs, but first-time buyers and homeowners may be disappointed with the lack of support.
If you’re wondering what the Spring Budget 2023 means for you and your money, here’s our summary of its key announcements:
Summary of the Government’s Spring Budget 2023:
- No new government scheme for first-time buyers, despite the end of Help to Buy
- No new schemes to support homeowners, despite rising interest rates and many struggling to afford to remortgage onto a new deal
- Continued energy bills support - Energy Price Guarantee will remain at £2,500 until June 2023
- More childcare support - 30 hours a week of free childcare for children over 9 months in England by 2025
- Disability Benefits Reform - offering support to Disability Benefits claimants who want to find work
- Pension changes - the Lifetime Allowance is abolished and the annual allowance has increased
- Increase in Corporation Tax from 19% to 25%, but businesses with less than £50,000 profit will be exempt from increase
No change for first-time buyers
Previous government budget announcements have unveiled ambitious plans to help first-time buyers get onto the property ladder. The Help to Buy scheme, Help to Buy ISA and Lifetime ISA, for example, were just a few initiatives introduced by the Conservative government to turn renters into owners.
Unfortunately, there were no such announcements in the 2023 Spring Budget, which may leave many first-time buyers feeling uninspired — especially given the end of the Help to Buy scheme earlier this year.
If you’re struggling to save a deposit or you’re finding it hard to pass lenders’ affordability checks, don’t give up hope. There are a number of existing first-time buyer schemes and alternative ways to get on the ladder that you might not have heard of. While some of them are government-backed, others have been introduced by lenders.
See what budget boosting schemes you’re eligible for
At Tembo, we’re experts in helping buyers discover their true buying budget. In fact, on average our customers boost their budget by £82,000. To see how much you could afford, create a free Tembo plan
No change for homeowners
First-time buyers aren’t the only ones likely to feel let down by the Spring Budget 2023. Homeowners on variable rate mortgage deals may have been hoping for some respite from rising interest rates.
The Bank of England has increased the base rate for the 11th time in a row, rising from 0.25% at the start of February last year to 4.25% on the 23rd March 2023.
Rising interest rates can lead to mortgage payment increases for those on variable rate deals, making homeownership more expensive than it was before.
While the Spring Budget offered little support for homeowners directly, Jeremy Hunt’s energy bill and childcare announcements may allow you to reduce living costs elsewhere.
Energy bills support
If you’re feeling frustrated by rising energy bills, you may breathe a sigh of relief because for the next 3 months there’ll be no further price rices. The Energy Price Guarantee (EPG), which limits typical energy bills, will remain at £2,500 until June 2023.
The EPG was originally due to increase to £3,000 from the 1st April, but the changes have been paused following a campaign backed by 130 charities and consumer organisations.
If you live in a poorly insulated property, have a very large home or use significantly more energy than the average person, your energy bills may exceed the EPG.
In addition to a freeze on the Energy Price Guarantee, Jeremy Hunt has also announced plans to end the ‘prepayment premium’, which sees prepayment meter customers paying more than direct debit customers for their energy bills. This will save 4 million households roughly £45 a year on their energy bills.
Eligible parents, carers and guardians in England will receive 30 hours a week of free childcare for children over the age of 9 months, by September 2025. Previously, this support was only available for children between 3 to 4 years old.
Parents on Universal Credit will also receive up to £951 for one child and up to £1,630 for two children each month. This money will be paid upfront, meaning parents won’t have to claim it back like they did previously.
Schools and local authorities will also receive funding so they can offer wraparound care such as breakfast clubs and after-school clubs. The government hopes this’ll help parents of school-aged children to reenter the workforce or increase their hours.
When you apply for a mortgage, lenders will take childcare fees into account when assessing your affordability. If childcare fees make up a significant percentage of your monthly expenses, this can restrict the amount you’re able to borrow. By relieving parents of the burden of childcare fees, they may have a wider choice of mortgage deals. Find out how much you could borrow with the help of our mortgage calculator.
Disability Benefits Reform
In his Spring Budget, Jeremy Hunt noted that the number of disabled people in work has risen by two million since 2013. However, he said that more needs to be done to support people accessing or returning to work.
He added: “We could fill half the vacancies in the economy with people who say they would like to work despite being inactive due to sickness or disability. With Zoom, Teams and new working models that make it easier to work from home, this is possible now more than ever.”
The Work Capability Assessment will be scrapped to make it easier for those claiming disability benefits to find work without worrying about losing some of their benefits.
According to a Disability Benefits Reform white paper, the government will:
- Change the emphasis on the benefits system from “what people can’t do, to what they can”, removing the Work Capability Assessment
- Personal Independent Payment (PIP) assessments will stay in place
- Extend the amount of time those with disabilities can spend with work coaches in Jobcentres
- Create a new ‘In-Work Progression Offer’ to help those in work who get Universal Credit to increase their earnings and move into better-paid jobs
- Extend the Work and Health programme to September 2024
Changes to pensions
The pensions annual allowance will increase from £40,000 to £60,000. This is the limit on how much money you can build up tax-free in your pension while still benefiting from tax relief.
Meanwhile, the lifetime allowance limit on pensions will be abolished. It was previously set at £1.07m and meant that anyone with a pension pot that exceeded this figure would have to pay extra tax.
Since the lifetime allowance was based on the amount that could be withdrawn, rather than the amount an individual put in, it was possible to exceed this limit accidentally due to pension pot growth.
The government will also spend £63m on a ‘returnships’ programme to encourage over 50s who’ve retired early to go back into work.
Read more: How to choose a financial advisor
Increase in Corporation Tax
If you run your own business, you may be affected by Corporation Tax changes.
From April 2023 onwards, the main rate of Corporation Tax will rise from 19% to 25%. Companies with profits of £50,000 or less will continue to pay 19%, but there will be a 26.5% Corporation Tax rate for profits between £50,000 to £250,000. Profits of more than £250,000 will be taxed at 25%.
What help is there for first time buyers?
Although the Spring Budget 2023 included little in the way of support for first-time buyers and homeowners, there are a number of schemes and financial products that you might not be familiar with.
At Tembo, we’re experts at helping first time buyers, movers and remortgages boost their affordability so they can discover their true buying budget. We advise on a range of Guarantor Mortgages and buying schemes that help you boost what you can afford.
For first-time buyers these include:
- Deposit Boost - releasing money from a family member’s property to put towards your deposit
- Income Boost - adding a family member’s income to your mortgage application as a guarantor to boost your borrowing potential
- Shared ownership - part buy, part rent schemes that help you get on the ladder for less
- Dynamic Ownership - co-own with siblings or friends while keeping individual stakes in the property
No matter what stage you’re at, we could help you boost your affordability
On average, our customers increase their buying budget by £82,000. To see which buying schemes you could be eligible for, create a free Tembo plan to get started.