Five essential things to know about your finances in 2023

Article written by Kellands Hale, our preferred independent advice firm.

This article is not intended to be financial advice to any individual. The views expressed are those of the author and Moneyfactscompare.co.uk does not endorse the content.

Now that 2023 has begun, you might be looking forward to the year ahead and what’s in store for your finances. While nothing is certain, having some sort of expectation of what lies in front can help you manage your financial goals.

Last year, rising interest rates and inflation proved concerning for many savers, homeowners, investors, business owners and employees. What’s more, Ofgem’s rising energy price cap has been challenging for people up and down the country, putting pressure on household expenditure throughout the year.

These top stories of 2022 are likely to continue well into this year, but there could be light at the end of the tunnel.

Below we have listed five essential events which are set to impact your finances in 2023.

One of the biggest financial headlines of 2022 has been the rate of inflation. In the year to November 2022, the Office for National Statistics (ONS) reported inflation reached 10.7%.

In other words, compared to November 2021, the price of a typical basket of goods increased by 10.7% last November.

Plus, the Bank of England’s (BoE) base rate has been hiked nine times since December 2021, reaching 3.5% in December.

Unfortunately, it seems the UK’s economic challenges are not over yet. A report from Ernst & Young last October suggested that GDP would fall by 0.3% in 2023 as a whole.

So, the UK economy could remain in decline throughout the year, although of course, this is never certain. With real incomes being squeezed by inflation and high interest rates, there could be difficult times ahead.

However, it is important to stay calm – once inflationary pressure eases, recessionary conditions may follow.

Plus, a recession may not immediately affect your personal finances. Speak with your Kellands financial planner if you’re concerned about the impact of a recession.

Following Jeremy Hunt’s Autumn Statement, you might be wondering which elements of your finances will be affected by his announcements.

One key aspect set to change is that of your unearned income. This is usually defined as income that does not come from a pension, employment or profits from a business – including dividend earnings, capital gains and inheritance.

In his statement, Hunt announced he will reduce the Capital Gains Tax (CGT) annual exempt amount from £12,300 a year to just £6,000 in April 2023, and again to £3,000 in April 2024.

In a similar vein, the Dividend Allowance will reduce from £2,000 to £1,000 in the 2023/24 tax year, and again to £500 the following year.

What’s more, the Inheritance Tax (IHT) “nil-rate band” and “residence nil-rate band”, standing at £325,000 and £175,000 respectively, were already frozen until 2026 by former Chancellor Rishi Sunak. In the Autumn Statement, Hunt extended the freeze until 2028.

So, you could pay more tax on your unearned income from April 2023 onwards. To make the most of your current allowances before they fall, contact your Kellands financial planner today.

In March 2021, it was announced that Corporation Tax will be levied at an additional 6% from April 2023, bringing its rate to 25%.

This applies to businesses with profits of more than £250,000. If your business profits are less than £50,000, the rate will remain at 19%. The rate of Corporation Tax will be tapered for companies profiting between these margins.

If you are a business owner, this increase may significantly increase your annual tax bill from April onwards.

To prepare for this change, it could be helpful to review your company’s expenses with your Kellands financial planner and adjust where possible. We can help.

In more positive news, in his Autumn Statement, the Chancellor confirmed that the State Pension “triple lock” will be reinstated in 2023, after longstanding uncertainty around the measure sowed doubt in the minds of some individuals throughout this year.

Under the triple lock, the State Pension will increase year-on-year in line with inflation. So, pensioners can expect an increase of more than 10% to their State Pension payments from April 2023.

For someone receiving the full new State Pension, this move represents an increase of more than £900 a year.

Plus, Pension Credit is set to rise by 10.1% in April 2023. Overall, this is great news for retirees, many of whom will receive a boost to their finances next year.

While the State Pension may not make up a significant portion of your retirement income, every little helps.

These additional funds could contribute to everyday expenditure, or be used to help the next generation get ahead after a tough few years.

Although there may be some challenges ahead, it is important not to panic. No matter what happens in the UK economy in 2023, we are here to help your wealth thrive despite volatile conditions.

Creating a bespoke financial strategy with your Kellands financial planner means you can prepare for any rocky terrain you encounter, and may help put your money in a prosperous position for potential growth.

If you need us, we’re here – in 2023 and beyond.

To ensure you are prepared for the changes 2023 will bring to your wealth, email us at hale@kelland.co.uk, or call 0161 929 8838.

The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.

The Financial Conduct Authority does not regulate estate planning, tax planning or will writing.

This article is for information only. Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.

© Kellands (Hale) Limited is authorised and regulated by the Financial Conduct Authority. FCA Firm Reference No. 193498