On 22nd November 2023, the Chancellor of the Exchequer, Jeremy Hunt, set out the UK Government’s plans for the country’s economic growth in the 2023 Autumn Statement. This blog will outline the effects of these announcements on the public.
Growth, Inflation & GDP
It has been announced that forecasts produced by the Office for Budget Responsibility (OBR) show that the UK economy will grow by 0.6% this year and is now 1.8% larger than it was pre-pandemic. This is despite predictions in March that it would shrink by 0.2%. The rate of growth predicted earlier this year, however, was higher, meaning that the current forecast sees only a 0.6% improvement in growth for 2027 when compared with the March projections.
Inflation is currently at 4.6% and it is expected to fall to 2.8% by the end of 2024. A target of 2% has been set for 2025.
The Autumn Statement shows that GDP is expected to rise over the next four years, reaching 2% in 2027.
National Living Wage
From April 2024, the National Living Wage will increase to £11.44 per hour. This is a 9.8% increase from the current rate of £10.42. It is important to note that from April 2024, the rate bracket for ages 21-22 will be scrapped; workers aged 21 and over will be entitled to the National Living Wage.
Rates for the 2024 National Minimum Wage (workers aged 20 and under) are as follows:
- Under 18s and apprentice rates – £6.40 per hour
- 18–20 year-olds – £8.60 per hour
Please note that the apprentice rate only applies during the first year of the apprenticeship if the apprentice is aged 19 or over.
Employee National Insurance
Starting on 6th January 2024, Employee National Insurance will be cut to 10%. This is a 2% decrease from the current rate of NI. On an average salary of £35,000 a year, there will be a saving of £450. The government believes that decreasing employment taxes will increase employment rates as a higher net wage acts as an incentive to find work.
Taxing the Self-Employed
Self-Employed individuals currently pay Class 2 National Insurance at £3.45 per week (if your profits are over £12,570) and Class 4 National Insurance at 9% on profits between £12,570 and £50,270. The Chancellor has announced a reform for how the self employed are taxed. This means that, from April 2024, the Class 4 NI rate will be reduced to 8%. Class 2 NI will be abolished.
In line with the pensions triple lock, the state pension will increase by 8.5% to £221.20 per week.
A call for evidence has been launched by the government relating to a “lifetime provider model” of pension schemes. This would allow contributions to be paid into an existing scheme when changing employers, rather than having several “small pot” pensions.
Benefits & Back to Work Scheme
It has been announced that Universal Credit and other benefits will be increasing by 6.7% from April 2024. This is in line with the September 2023 inflation figure.
£1.3 billion is set to be invested over the next five years to help those with health conditions find work. A new “Back to Work” scheme will also be introduced which will implement mandatory work placement for claimants who have been unemployed for 18 months. If this is not engaged with the claimant may have their benefits claim closed.
Full expensing is a form of relief which allows businesses to claim 100% of capital allowances on investments in qualifying fixed assets. This was originally intended to cease in March 2026; however, it has been announced today that it will now be implemented permanently.
Research and Development
The Research and Development Expenditure and SME relief schemes will be merged in an effort to simplify tax. The tax rate applied to losses will be reduced to 19%. This will apply to R&D expenditure incurred during accounting periods beginning on or after 1st April 2024.
The following information has also been announced within the Autumn Statement:
- The local housing allowance, which has been frozen for three years, will increase, being raised to the 30th percentile of local market rents.
- The Small Business Procurement Act means that 30-day payment terms will now apply throughout the subcontract chain.
- The small business multiplier has been frozen for another year. It has remained at 49.9 pence since the 2020-21 tax year.
- Business rates relief for hospitality, retail and leisure has been extended for another year.
- Alcohol duty will be frozen until August 2024.
- Tobacco duty will increase from 22nd November 2023.
- A further four investment zones will be introduced. These will be in the East Midlands, West Midlands, Greater Manchester and Wrexham, Wales. They hope to increase employment in those areas.
- Increased funding has been proposed for apprenticeships, technology and AI development, and regeneration projects.
- £4.5 billion has been proposed for supporting companies on the approach to the Net Zero deadline over the next 5 years.
If you have any concerns regarding the changes set out in the Autumn Statement and how they could impact you and your business, do not hesitate to contact us. You can find our contact information here.