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Saturday, March 2, 2024

Autumn Statement Summary 2023

Ilyas Patel, is a Director at The Tax Experts. He is a Fellow of the Association of Chattered Certified Accountants with extensive experience spanning over 30 years. Ilyas has established positive relationships with senior levels within the HMRC and is actively involved in shaping future polices and informing emerging practices and legislation.He has his own buy-to-let business and has also established his own accountancy firm. He is Chairman of the Business Breakfast Club (BBC), a membership organisation of over 40 leading businesses. Mr Patel shares provides a summary on the Chancellor's Autumn Statement

The much-anticipated Autumn Statement 2023 recently unveiled by the Chancellor of the Exchequer, Jeremy Hunt, brings significant changes impacting various sectors of the UK economy.

From inflation forecasts to adjustments in taxes, benefits, and wages, the statement outlines crucial fiscal policies and projections for the coming years.

We’re highlighting the most impactful financial changes, which will make a difference to a wide range of people, from business owners to employees, and from the top earners to the low-income households

Inflation Trends and Predictions

The Office for Budget Responsibility (OBR) forecasts a significant drop in headline inflation, anticipating a decrease to 2.8% by the end of 2024 and reaching the 2% target in 2025.

This projection comes as a relief considering the current inflation rate at 4.6% for October, a reduction from a peak of over 11%.

 

Benefits Increase in Line with Inflation

Benefits will see a rise by 6.7% next year, mirroring the inflation rate of September.

Contrary to some expectations, the Chancellor chose not to utilise the lower October inflation figure, which would have significantly cut spending.

This increase applies to working-age benefits, including means-tested ones like Universal Credit and disability benefits.

This also comes with a change in those refusing to seek work being disqualified from receiving benefits.

Those receiving job seeking benefits must go on a mandatory work placement if they’re still job hunting after 18 months.

 

Enhancements in Local Housing Allowance

Addressing the high living costs for private renters, the Local Housing Allowance rate will be uplifted to the 30th percentile of local market rents.

This adjustment will benefit approximately 1.6 million households with an average support of £800 next year.

Tobacco and Alcohol Duty Adjustments

The Chancellor announced an increase in duty on hand-rolling tobacco by an additional 10%, while freezing all alcohol duty until 1 August next year.

This freeze includes beer, cider, wine, and spirits.

 

Pensions Triple Lock and Growth Forecast

The government reaffirms its commitment to the pensions triple lock, promising an 8.5% increase in the state pension to £221.20 a week from April 2024.

Furthermore, the UK economy is forecasted to grow by 0.6% this year and 0.7% next year, with steady growth expected in the subsequent years.

Innovative Measures for Energy and Manufacturing

The Chancellor confirms plans to reduce grid access delays for clean energy businesses and offers financial relief for residents living near new transmission infrastructure.

Additionally, a commitment of £4.5 billion is made to support strategic manufacturing sectors between 2025 and 2030.

 

Incentives for Investment Zones and Freeports

Financial incentives for Investment Zones and tax reliefs for Freeports will be extended from five to ten years, alongside a new £150m Investment Opportunity Fund for the program.

 

Tax Reforms for the Self Employed

Chancellor Hunt has announced the removal of the “Class 2” National Insurance charge for self-employed individuals earning above £12,570.

This measure eliminates the mandatory weekly charge of £3.45, translating to an annual saving of £192 for the average self-employed person.

Additionally, the “Class 4” National Insurance rate, currently at 9% for earnings between £12,570 and £50,270, will be reduced to 8% starting April.

Collectively, these changes are set to benefit approximately two million self-employed individuals, saving them an average of £350 annually from April, as per Hunt’s statement.

 

Business Rates 75% Discount

The government will extend the 75% discount on business rates up to £110,000 for retail, hospitality, and leisure businesses for another year, benefiting independent shops and pubs substantially.

 

Tax break for businesses made permanent

Chancellor Hunt has solidified the future of business investment in the UK by making the “full expensing” tax break a permanent fixture.

This pivotal decision allows businesses to reclaim up to 25p in corporation tax for every £1 spent on IT, machinery, and equipment.

The beauty of this scheme lies in its simplicity: companies can now claim this relief immediately, rather than spreading the benefit over several years.

This policy is particularly advantageous for manufacturing companies and others that invest heavily in equipment.

However, it’s important to note that less profitable businesses, or those whose primary investments are in personnel and equipment, might not reap the same level of benefit.

Chancellor Hunt acknowledges the significant financial implications of this decision, estimating an annual cost of £11 billion.

He proudly claims this as “the largest business tax cut in modern British history,” highlighting the UK’s competitive edge with the lowest corporation tax rate and the most generous capital allowances among G7 countries.

 

National Insurance Cuts

Employee National Insurance will be cut by 2 percentage points from 12% to 10% from 6 January.

Currently, it’s charged at 12% on earnings between £12,571 and £50,271 – and 2% on anything above that.

 

Minimum Wage Increases

Moreover, the National Living Wage will rise from £10.42 to £11.44 per hour in April next year, marking the largest ever cash increase in the National Living Wage.

 

In Summary

The Autumn Statement for growth strategically balances support for individuals and businesses with fiscal prudence.

While it promises more money in the pockets of workers and pensioners, the ongoing economic challenges and the impact of high-interest rates remain concerns.

The UK’s path to fiscal stability and growth appears cautiously optimistic, requiring careful navigation in the face of global economic uncertainties.

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