Touchbutton 92 – Nothing I can say. A total eclipse of the heart…

Bonnie Tyler’s hit ‘Total Eclipse of the Heart’ (from which the above lyric is taken), was in its second week at the top of the pop charts when the Conservative Chancellor of the Exchequer, Geoffrey Howe, delivered his Budget 40 years ago to the date, on 15 March 1983.

Amongst his measures, Howe raised personal Income Tax allowances by more than twice the rate of inflation but kept rates at the same level. Corporation Tax rates on profits of small businesses were cut by 2% to 38%.

Social Democrat Party leader, Roy Jenkins, described Howe’s measures as, ‘a Budget for votes’ and the Conservatives went on to win the subsequent General Election in June 1983 by a majority of 144 seats.

“…aims to halve inflation, reduce public debt and boost economic growth…”

As expected, Howe’s 14th successor as Chancellor, Jeremy Hunt, focused in his Budget announcement yesterday on the Government’s aims to halve inflation, reduce public debt and boost economic growth, primarily by encouraging those in the over 50s age bracket to work longer, and for some, return to work.

Of particular interest in this regard is Mr Hunt’s announcements around pensions:

  • The annual allowance is increasing from £40,000 to £60,000 from 6 April 2023. Individuals will still be able to carry forward unused annual allowances from the three previous tax years.
  • The Money Purchase Annual Allowance and the minimum Tapered Annual Allowance will each increase from £4,000 to £10,000 with effect from 6 April 2023. The adjusted income threshold for the Tapered Annual Allowance will be increased from £240,000 to £260,000 again from 6 April 2023.

Returning to Bonnie Tyler for a moment, she lost the number one slot to Duran Duran’s ‘Is There Something I Should Know’ a few days after Howe’s Budget.

“….Hunt’s announcement was that the Lifetime Allowance (‘LTA’) would be abolished ‘altogether’.”

That song title is strangely apposite here, given that Hunt’s announcement was that the Lifetime Allowance (‘LTA’) would be abolished ‘altogether’.

What we should know is that the Government will remove the LTA charge, effective from 6 April 2023, before fully abolishing the LTA in a future Finance Bill, at an as yet unspecified date.

Meanwhile, the maximum Pension Commencement Lump Sum (‘PCLS’) for those without protections will be retained at its current level of £268,275 (i.e. 25% of the current statutory LTA of £1,073,100) and will be frozen thereafter. Although it has not been stated, the inference is that for those with protections the maximum PCLS will remain at the levels commensurate with that protection. So, for someone with Fixed Protection 2014, the maximum PCLS will remain at £375,000 (i.e. 25% of £1,500,000).

Incidentally, Duran Duran had two weeks at number one with the aforementioned ‘Is There Something I should Know’, but in that April, their ‘New Romantic’ rivals, Spandau Ballet, held the number one slot for four weeks with the ballad, ‘True’.

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