The UK government has released its highly anticipated Autumn Statement, providing a glimpse into its economic priorities to unlock investment, reward work and grow our economy in the upcoming months. Let’s take a closer look at the key highlights and implications of the latest financial update.
The government aims for over 29 million working people to benefit from tax cuts from 6th January 2024. The initial National Insurance Contribution (NIC) rate will drop from 12% to 10% for earnings between £12,570 and £50,628, saving the average worker (on a salary of £35,000) £450 in 2024-25.
These tax cuts will also be extended to the self-employed from the 6th of April 2024, with self-employed National Insurance Contributions reducing from 9% to 8%. This change is reported to benefit around 2 million self-employed individuals and save the average self-employed person £350 in 2024-25. Class 2 NICs for the self-employed of a flat-rate weekly contribution of £3.45 have been abolished.
The Office for Budget Responsibility (OBR) has forecast that these changes will increase employment numbers by 28,000 in 2028-29.
Rewarding hard work
From 1st April 2024, the National Living Wage (NLW) will increase by 9.8% to £11.44 for workers aged 21 and over. This increase will benefit over 2.7 million low-paid workers.
Alongside this increase in the NLW, the government promises to invest over £2.5 billion over the next five years to expand available support for those who are long-term unemployed to get back into work.
The chart below has been taken directly from the Autumn Statement published on the government website and depicts current and projected earnings under the National Living Wage.
Backing British business
The changes to get more people into work, increasing the National Living Wage and tax cuts mentioned above aims to grow the economy, bringing more jobs and increasing living standards. During the Spring Budget 2023, the government announced full expensing for three years from 1st April 2023, allowing businesses to write off the full cost of qualifying plant and machinery investment. This change has now been made permanent, which the government describes as “the biggest business tax cut in modern British history.”
Further changes to business support include:
– Full expensing enabling companies to be rewarded with up to 25p off their tax bill for every £1 that they invest, which amounts to a tax cut of over £10 billion per year.
– Business rates support package worth £4.3 billion over the next five years to support small businesses and the high street.
– Foreign direct investment ensuring the door is open for those who want to invest in the UK’s future.
Small pot pensions will be addressed so that individuals can have contributions paid into their existing pension schemes when changing employers, providing “greater control over the pension.”
Pensioner incomes are being supported by maintaining the Triple Lock and increasing the basic State Pension, new State Pension and Pension Credit standard minimum guarantee for 2024-25 in line with average earnings growth of 8.5%. This means that the new State Pension will be worth up to £900 a year more.
The effectiveness of these measures will depend on their implementation and adaptation to the ever-evolving economic landscape. As businesses and households digest the details, the coming months will reveal the true impact of the Autumn Statement on the nation’s economic trajectory.
Tax treatment varies according to individual circumstances and is subject to change.
The Financial Conduct Authority does not regulate tax advice.
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