What Jeremy Hunt’s budget means for pensions, childcare, income tax and more

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Jeremy Hunt’s budget contained several measures to encourage the “economically inactive” back into work and help parents struggling with sky-high childcare costs.There were also several changes that spell particularly good news for higher earners.But a lot of the measures that will have the biggest impact, starting from next month, are plans that have already been announced, such as the freezing of personal income tax thresholds until 2028.

Known as fiscal drag, this will quietly suck many more Britons into paying income tax and push others into paying a higher rate, raising billions for the government.It is also fair to point out that about 21 million people are getting a “pay rise” of about 10% next month: pensioners, universal credit recipients and workers on the minimum or living wage.The chancellor announced a huge boost to the amounts that higher earners – from doctors to multimillionaires – can stash away for their retirement while enjoying the full tax benefits.The government argues it was forced to act because the cap on tax-free pensions has led many professionals including NHS consultants and GPs to take early retirement, and there have been predictions that more and more older public and private sector employees would change their behaviour or retire early to avoid being clobbered by penalties.To address this, Hunt announced big changes to the main pension allowances.

The lifetime allowance limits how much you can build up in pension benefits over your lifetime while still enjoying the full tax benefits, with anything over subject to a tax charge.

It applies to all personal and workplace pensions, but excludes the state pension, and was due to be frozen at its current level of £1,073,100 until 2026.

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