Autumn 2023 Budget – The perfect breakdown
It feels like only a moment has passed since the unveiling of the Spring Budget eight months ago in March. Today, the Chancellor of the Exchequer, Jeremy Hunt, presented the Autumn Budget Statement to the House of Commons, mapping out his economic strategy for the UK.
In the face of persistent cost-of-living pressures, the expectation was a focus on making challenging decisions to support financially struggling families, while also stimulating economic growth and maintaining a downward trajectory in inflation.
Anticipation was fueled by pre-statement rumors suggesting potentially significant tax cuts, particularly adjustments to tax rates for both the self-employed and employees.
True to expectations, the Autumn Budget brought forth a series of positive changes aimed at invigorating the UK economy and lightening the tax load on businesses and individuals. The economic outlook appears promising, with a forecast of 0.6% growth this year, 0.7% next year, and an anticipated acceleration to around 1.8% in 2028.
Let’s delve into the key points from today’s statement.
National Insurance Relief for the Self-Employed
Class 2 National Insurance Contributions will be entirely abolished for 2 million self-employed individuals with profits exceeding £12,570 per year, resulting in an average annual saving of £192 per person. Importantly, access to benefit entitlements and credits, including the state pension, remains unaffected, while voluntary contributions can still be made.
For those with taxable profits below £6,725, voluntary contributions will remain necessary to access state benefits, with the rate maintained at £3.45 per week.
In another significant move, Class 4 National Insurance Contributions, currently at 9% on profits between £12,570 and £50,270, will be reduced by 1 percentage point to 8%, translating to an average annual saving of £350 for self-employed individuals.
Full Expensing Made Permanent
In what is hailed as the most significant business tax cut in modern British history, full expensing will be made permanent due to reductions in inflation and borrowing. Initially slated for a 3-year period, this tax break allows businesses to deduct the cost of qualifying machinery or plant from their pre-tax profits.
The goal is to boost business investment, with the government anticipating an increase of around £3 billion per year.
Employee National Insurance Cut
A substantial change benefiting 27 million workers involves the reduction of the main rate of Employee National Insurance by 2 percentage points, from 12% to 10%, for those earning between £12,570 and £50,270. This cut is expected to save employees earning £35,000 an average of £450 per year.
Urgent legislation will be introduced to expedite this change, aiming for it to take effect from January 6th next year rather than waiting for the new tax year in April.
National Living Wage Increase
The National Living Wage will see a 9.8% increase to £11.44 per hour from April 2024, part of the government’s effort to eliminate low pay. This change is expected to raise earnings for approximately 2 million workers.
Currently at £10.42 per hour, the National Living Wage will increase by £1.02 per hour, applicable to all workers aged 21 and over. Previously, it only applied to workers aged 23 or over. Workers aged 18 to 20 will receive at least £8.60 an hour from April, while those aged 16 and 17, as well as apprentices, will have a minimum pay of £6.40 per hour.
Other Key Points Announced
– Universal Credit and other state benefits will increase by 6.7% from next April.
– The small business multiplier will be frozen for another year, and the 75% business rates discount for retail, hospitality, and leisure will be extended for another year.
– Alcohol duty is frozen until August 1st, 2024, but tobacco duty will increase by 10%.
– £450 million will be allocated to the local authority housing fund to deliver around 2,400 new homes.
– In a positive development for landlords, the local housing allowance will increase, providing around 1.6 million households with an average of £800 in support to offset rising rental costs.
– £50 million will be invested over the next 2 years to increase the number of apprentices in the engineering sector and other key growth sectors.
– A £500 million fund will be created to support development in Artificial Intelligence.
– The pension triple lock will be maintained, resulting in an 8.5% increase in the full State Pension from April 2024.
If you want to discuss how any of the above may impact you or your business, then Bright Ideas Accountancy are your go to accounting partners to help make sense of any and all changes. Please get in touch with us on 0161 669 4221 or email Info@biaccountancy.com.
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