The big things from the Budget that will affect your money

Authored on
22 Mar 2023



The finance industry gets very excited about Budgets – it’s their big chance to see what financial changes are coming in the next year. But for the average person on the street it can feel a bit ‘meh’. However, if we take out the dubious jokes, ignore the fact that the speech always goes on too long and put aside some of the more boring technical jargon, there are actually some important things that are announced in Budgets that can have a big impact on your money.

To save you the hassle, we’ve done that digging for you and here are the three big changes you need to know about.

Childcare costs are falling – hopefully

The Government is extending the 30 free childcare hours to children from nine months and up. Currently it’s only available for children from the term after they hit three years old, but that will change. However, it’s going to take a while to come in. The first people to benefit will be working parents of two-year-olds who will get 15 free hours from next April. Then from September 2024 parents of nine-month-olds will get the 15 free hours, before they all get 30 free hours from September 2025. This is obviously frustrating for parents of babies and toddlers today as they won’t get much (if any) benefit. The people who will benefit the most are parents of children who have yet to be conceived.  

We assume that the same rules will apply as with the current free hours: that both parents have to be working and earning minimum wage for 16 hours a week. Currently if either parent earns over £100,000 they only get 15 free hours – it’s unclear whether that will apply to the new scheme or whether they will get nothing. The current scheme also only runs term time, so for 38 weeks of the year. It’s not been made clear whether that will still be the case, or if it will run for the full 52 weeks of the year.

The Government promised to increase the amount it pays nurseries for these free hours, as currently they pay below-market rate, meaning most charge parents top-up fees to recoup more money – from things like meal charges to activity fees or charges for extra hours. However, they haven’t actually said how much more they will pay – so these top-up fees could well remain.

The other issue is whether there will be enough supply to meet the expected new demand. The Government says that’s why it’s staggering the introduction of the new scheme, to ensure that nurseries aren’t overwhelmed with applications. As part of the plans it has said nurseries can increase the children to staff ratio for two year olds, from 1 staff member to four children to 1:5. Whether nurseries chose to adopt this is another question.

There were also some changes for those on Universal Credit. Firstly, anyone increasing their working hours or taking on new work won’t have to pay for any extra childcare costs upfront, instead the Government will pay childcare providers directly.  Secondly, the cap on how much the Government will pay will increase from £646 a month per child, to £951 for one child and £1,630 for two children.

So, lots of things that will help to make childcare cheaper, but not immediately and with some caveats.

Energy prices are staying lower for longer

The Government has extended its Energy Price Guarantee at the current level for another three months. Currently it caps average household energy costs at £2,500 a year and it was due to increase to £3,000 from April. However, it will now stay at £2,500 for another three months. The hope is that when it then increases at the start of July energy prices will have fallen and mean that the cap is redundant. It’s pretty confusing at the moment because we have to be aware of two caps: the Government’s one I just talked about and the Energy Price Cap from Ofgem, which we all used to look at. Current forecasts vary but it’s expected the Ofgem price cap will drop to around £2,000 by July – meaning the Energy price Guarantee will be surplus to requirements.

Pension limits are rising

Good news, you can now pay more money into your pension. Bad news, it will probably only benefit the wealthy among us. Previously you could only pay £40,000 into your pension each tax year, that will rise to £60,000 from April 6th, assuming that doesn’t exceed your income that year. Clearly £40,000 a year is far more than the average person is putting into their pension, but it might be useful in future or in a year where you have bumper earnings and are trying to top up your pension.

Anyone who has already accessed their pension will get a higher limit too, currently they can only pay in up to £4,000 a year into the pension but this will rise to £10,000 from April 6th too. There’s also a lifetime limit on how much you can pay into your pension pot, which is £1.07m at the moment, but that’s being removed entirely, so there will be no limit. Again, a million-pound pension pot is a pipe dream for many, but your future wealthy self might be able to make use of it!

Remember that the value of investments can change, and you could lose money as well as make it. How you're taxed will depend on your circumstances, and tax rules can change. Tax and pension rules apply.

These articles are for information purposes only and are not a personal recommendation or advice.