Pension Triple Lock Retained
In today’s Autumn Statement, the Chancellor officially affirmed that the triple lock will result in an 8.5 percent increase in the state pension for older individuals come April next year. This adjustment translates to a noteworthy raise, with the headline full-rate state pension reaching £221.20 per week, marking a yearly uptick of £902 and bringing the total to approximately £11,500.
For those who attained state pension age prior to 2016, the basic rate is set to be £169.50 per week, reflecting a yearly increment of £692 and a new annual figure of around £8,800.[1]
Class 2 NI abolished for self-employed
Chancellor Jeremy Hunt also announced a significant change, declaring the government’s decision to eliminate Class 2 National Insurance for self-employed individuals. Hunt explained, “After thorough consideration, we are scrapping Class 2 National Insurance, resulting in an annual savings of £192 for the average self-employed person.”
This initiative, aimed at simplifying processes and reducing taxes, is set to benefit nearly two million self-employed individuals throughout the United Kingdom.[2]
This change is expected to result in substantial savings, with the average self-employed individual earning £28,200 annually set to pocket £350 less in NICs for the 2024/25 fiscal year.[3]
Class 4 National Insurance to be cut to 8%
Additionally, there’s good news for the self-employed as Class 4 National Insurance is set to see a reduction from 9% to 8%.
Chancellor Hunt emphasised that he prioritised the reduction of National Insurance in his Autumn Budget because of its direct impact on working individuals.[4]
National living wage to increase by 9.8% to £11.44 an hour
The Chancellor also declared a 9.8% surge in the National Minimum Wage, elevating it to £11.44 per hour. This increase will encompass individuals aged 21 and over for the first time.
For a full-time worker aged 23, this adjustment translates to a substantial annual boost of £1,800, while a 21-year-old worker can anticipate a 12% rise, equivalent to £2,300 annually.
Simultaneously, the National Minimum Wage for those in the 18 to 20 age brackets will climb to £8.60 per hour, up from the previous £7.49. Additionally, apprentices and individuals aged 16 and 17 will witness a remarkable hourly pay escalation of over 20%, ascending from £5.28 to £6.40 an hour.[5]
National Insurance to be cut by 2% from January
Chancellor Hunt unveiled a major boost for 27 million workers across the UK, along with an extended relief for businesses in the Autumn Statement.
The exciting news includes a two-percentage-point reduction in National Insurance Contributions, dropping from 12% to 10%. What makes this even better is that it kicks in from January 6th, 2024, not waiting until the usual April tax year starts, so everyone can see the positive change in their January payslips.
This emergency legislation is no small feat, amounting to £450 in savings for someone earning the average of £35,000 and contributing to a whopping £94,000 increase in the British workforce. The average nurse is expected to pocket £520 in savings, while a typical police officer stands to gain £630, according to the Chancellor.
In Jeremy Hunt’s own words, “If we want people to get up early in the morning, if we want people to work nights, if we want an economy where people go the extra mile and work hard, then we need to recognise that their hard work benefits all of us. So today, Mr Speaker, I am going to cut the main 12% rate of employee National Insurance.”[6]
Business Rates Relief Extended
There was great news for businesses! The Chancellor confirmed plans to extend Business Rates relief, ensuring full funding for local authorities, as revealed in the fine print of the Autumn Statement.
Building on previous measures initiated during the pandemic, the Chancellor announced this extension today in Parliament. The comprehensive business rate support package, totalling £4.3 billion over the next five years, includes a continuation of the 75% Retail, Hospitality, and Leisure relief and a freeze on the small business rate multiplier.
According to Chancellor Jeremy Hunt, this strategic move is set to safeguard 90% of ratepayers for a fourth consecutive year. Effective from April 1st, the changes outlined in the Autumn Statement documentation assure that English Local Authorities will be entirely compensated for the income loss resulting from these business rates measures, and they will receive additional funding to cover administrative and IT costs.[7]
Employees may be allowed to choose where pension contributions go
In a slightly smaller pensions announcement, the government is considering a game-changing move to give pension savers the legal right to maintain a “pension pot for life.” The goal is to make it easier for workers to manage their retirement savings as they switch jobs.
Instead of leaving it to the employer to pick the pension scheme, employees might soon have the power to choose where their contributions go. The reforms could unlock an extra £1,000 a year in retirement income for an average earner saving from the age of 18.[8]
30 hours of free childcare for working parents
Valuable updates for parents are in the pipeline. Childcare support is set to undergo a notable enhancement, featuring an up-front provision. After years of being stagnant at £646 a month, the maximum support limit is poised to see an increase.
Furthermore, a significant expansion is on the horizon. Commencing September 2024, the 30 hours of free childcare per week for 38 weeks will extend its coverage to encompass one- and two-year-olds. These measures aim to provide increased support and flexibility for families.[9]
“Full expensing” tax break for businesses to be made permanent
The implementation of Permanent Full Expensing ensures the assurance required by businesses to invest confidently while optimising costs.
Companies can now secure a permanent 100% Capital Allowance on qualifying main rate plant and machinery investments. This translates to a reduction in taxes by up to 25p for every pound invested.[10]
Economy and Public Finances
The Chancellor’s comprehensive package encompasses 110 measures strategically designed to stimulate economic growth.
Projections from the Independent Office for Budget Responsibility (OBR) anticipate a gradual economic expansion, with growth rates reaching 0.6% this year, 0.7% next year, escalating to 1.4% in 2025 and further progressing to 1.9% in 2026, and 2% in 2027, before stabilising at 1.7% in 2028.
The OBR forecasts a decline in headline inflation, projected to reach 2.8% by the end of 2024 and align with the Bank of England’s 2% target rate in 2025. Meanwhile, the underlying debt is expected to represent 91.6% of GDP next year, followed by incremental increases to 92.7% in 2024-25, 93.2% in 2026-27, before experiencing a decline to 92.8% in 2028-29.
In terms of borrowing, a downward trajectory is anticipated, starting at 4.5% of GDP in 2023-24 and progressively decreasing to 3% in 2024-25, 2.7% in 2025-26, 2.3% in 2026-27, further reducing to 1.6% in 2027-28, and reaching 1.1% in 2028-29.[11]
Alcohol Duty Freeze & Tobacco Rates Adjust
The freeze on all alcohol duty will continue until August 1st of the coming year. Meanwhile, the duty rate on tobacco products is set to rise by 2% above the Retail Price Index (RPI) inflation, with hand-rolling tobacco facing a steeper increase of 12% above RPI.[12]
For a complete overview of everything covered in today’s Autumn Statement 2023 click here – Autumn Statement 2023 or if you would like to read the speech in full you can find it here – Autumn Budget 2023 Speech
