Your quick and easy roundup of the Autumn Statement
After much speculation about what the Chancellor, Jeremy Hunt, might announce in his 2023 Autumn Statement, we found out today. Notable by its absence was any change to Inheritance Tax, the tax that many had tipped would be reduced or even scrapped.
As it turned out, neither happened, but the reason for the speculation was understandable. With recent headlines reporting that the government had overseen the biggest increase in taxes during a single parliament since records began, it was hardly surprising that Mr Hunt had come under pressure by Tories to cut taxes.
On the day, the financial headroom provided by better than expected figures around the UK economy, meant Mr Hunt was able to meet fellow Tory MPs some way.
“The Chancellor’s record cuts in National Insurance has provided much-needed relief to UK workers rather than investors,” said Nick Farmer, AFH’s Taxation Specialist.
“Given the already announced freezing of several tax allowances and thresholds until 2028, the Chancellor focused on growth and productivity. By introducing record-breaking reductions in National Insurance Contributions for both the employed and self-employed, the Chancellor has left landlords and investors in the cold regarding tax savings.”
Read on to learn more about some of Mr Hunt’s key announcements and what they may mean for you. Before you do, we will look at the UK economy in November 2023.
The UK economy still faces challenges
According to the Office for National Statistics, inflation stood at 4.6% in October 2023, less than half of the 11.1% it was at 12 months earlier. While that’s good news, it’s still more than twice the Bank of England’s target of 2%.
High inflation, labour shortages and Brexit’s after-effects have all impacted on the UK’s economy in recent years, resulting in low economic growth and fears of a possible recession. Official figures show Britain’s economy stagnated between July and September, although it did sidestep a recession.
One way the Chancellor now hopes to boost the nation’s sluggish economic growth is through the tax cuts he’s provided to businesses. So with this in mind, let’s now consider some of the Chancellor’s announcements.
A cut to National Insurance Contributions
The Chancellor said that in “recognition” of the contribution they made, he would abolish Class 2 National Insurance Contributions (NICs) for the self-employed. The change will come into effect from April 2024.
Furthermore, Mr Hunt helped the self-employed by also announcing that he was cutting Class 4 NICs from 9% to 8% for earnings between £12,570 and £50,270. The drop will come into force in the 2024/25 tax year.
It wasn’t only the self-employed who benefitted though, as the Chancellor also reduced the main class of NICs for employed people by 2%. This means the rate will drop from 12% to 10% between £12,570 and £50,270, something he said would benefit 27 million UK workers, and surprisingly, this will come into effect on the 6 January 2024.
“On the face of it, this is going to be welcomed by households across the UK,” said Nick Farmer.
“Someone who is earning more than £50,270 could save more than £750 a year from January 2024, depending on their tax code and circumstances.”
The tax cuts will have a total value of more than £9 billion a year, something the Chancellor said was the largest ever cut to employee and self-employed National Insurance. The combined rate of Income Tax and NICs will fall from 32% to 30% for basic-rate taxpayer when the changes come into force.
The State Pension will increase by 8.5%
Prior to the Autumn Statement, there was plenty of speculation that the ‘triple lock’ rules could be altered by the Chancellor to reduce the benefit’s drain on the national purse.
In the end though, the government honoured the ‘triple lock’s’ commitment and announced that it would increase the State Pension by 8.5% in April 2024.
Increase in National Living Wage
The increase of the National Living Wage by nearly 10% for those aged over 21 years is no doubt going to be welcomed by many on lower incomes. However, the news may not be as welcome for business owners, who will see the minimum they pay their workforce increase to £11.44 per hour as from April 2024.
Extension of business investment tax breaks
The Chancellor announced that he was making full expensing permanent. It allows businesses to claim back all of the costs of qualifying equipment from profits before tax is deducted.
Get in touch
If you would like to discuss how the announcements made by the Chancellor could affect your finances, please call us on 01527 577775 or speak to one of our advisers, as we’d be happy to help.
Wednesday 22 November 2023 | 4:20pm