Autumn Statement review 2023 – How does the budget affect me?
This much anticipated budget was one of the most critical for the current Conservative Government, following the disastrous ‘Mini-budget’ in August 2022. Expectations suggested that the budget could see changes to tax rates in the UK, and a freeze on fuel duty increases and Stamp Duty changes.
The chancellor took to the floor at 12.35pm on Wednesday following the speakers standard declarations. This was presented as an ‘Autumn Statement for growth’ to help to reignite the British economy with measures to increase business investment and help people to get to work.
What will be announced in the Autumn budget?
Today the Chancellor will announce 110 measures to “help grow the British economy”, with 4 key areas to support this growth in British business and the public sector to help to re-ignite the economy. In this article, we’ll break down the top points to explain how they work in the real world for British households and what impact it will have on your daily finances.
The OBR (Office for Budget Responsibility) had said that headline inflation would fall to 2.8% by the end of 2024.
Hunt said “this government committed to Halve inflation – 11.1% at the beginning of the current government, now 4.6% and continue to aim for the target to hit 2% by next year.”
The budget was opened with four key measures to support households on low income and those in need of the most support.
- Lowest income families will receive an increase of 6.7% by next year on benefits such as Universal Tax Credits and disability benefits.
- Rent is recognised to be half of the living costs of lower income families, the government will increase Local Housing Allowance rates to the 30th percentage point of local market rents, giving 1.6 million households the equivalent of £800 of support next year
- Alcohol duty allowance (Brexit pub guarantee) to be frozen to 1st August 2024 and an increase of 10% duty to hand rolling tobacco.
- Pensioners to see an increase of 8.5% to £221.20 to the Triple Lock pension reform introduced several years ago, from April 2024.
The Chancellor also announced a commitment of £7million to be pledged to tackle antisemitism in the UK following the attack on Israel by Hammas.
Mr Hunt also reminded the House that the UK has the second lowest government debt in the G7 countries and second highest growth.
Public sector borrowing to be below 3%
Another key thing to note from the Autumn 2023 budget is that the Office for Budget Responsibility has stated public sector borrowing needs to be less than 3% of GDP.
This was discussed in a report on the government’s tax and spending plans which clarifies that our Chancellor Jeremy Hunt has only £27billion to spend and most of this will go on the measures outlined in today’s budget.
While this will contribute to a minor cut in National Insurance contributions for tax payers (only 2%) and business investment tax relief, it does little to tackle the UK’s growing debt.
National Insurance cuts: welcome news for UK tax payers
UK tax payers will be happy to note there will be a tax cut for National Insurance contributions as the rate is reduced from 12% to 10% as of 6th January 2024.
The current rate of National Insurance is 12% which is charged for earning of £12,571 – £50,271 and an additional 2% for anything higher than this. The idea here is that cutting employee National Insurance by 2% to 10% will help 27 million to save £450 per year.
With an ongoing cost of living crisis, this saving will hopefully make a huge difference for the most vulnerable families across the UK.
There will also be specific cuts to National Insurance for self employed workers which can save them around £350 per year on average.
National Insurance relief for veterans plus £10million commitment of support
In other news about National Insurance, Jeremy Hunt has promised that the previous scheme which allowed National Insurance relief for employers of eligible veterans will be extended through 2024.
He has also committed to providing £10million in support for the Veteran’s Places, Pathways and People programme. This is an important scheme which provides mental health support and treatment pathways for UK veterans and training for those who support them.
State pension rates increase from April 2024
The UK state pension will rise by 8.5% from April 2024 onwards due to the previously promised ‘triple lock’ by the Government, which has been in effect since 2011.
The ‘triple lock’ is a commitment made by the government to increase state pension beyond the minimum legal requirement. In the UK, the government is legally obliged to increase basic and new state pension every year in line with average earnings.
The triple lock means that pensions will instead rise by either earnings growth, CPI inflation or 2.5% (whichever is highest). Those receiving state pension will now be given £221.20 per week from the government as of April next year, in line with the 2023 pay increases.
Savers will now also have a legal right to move pension funds to any new employer and have ‘1 pension fund for life’ rather than struggling to keep track of multiple pensions over the course of their working life.
UK minimum wage will rise in April
Those on low incomes are set to receive a pay rise as of April 2024, with The National Living Wage for over 23s increasing to £11.44 an hour from the previous rate of £10.42 an hour.
This is an almost 10% increase which should lead to up to £1,800 more being earnt for those in full time employment. This puts the Conservatives on track to meet their pledge to end ‘poverty pay’ in the UK, which was first promised in their 2019 pledge.
Other announced changes include:
- 21 – 22 year olds will now be eligible for The National Living Wage, meaning an even higher pay increase from their previous rate of £10.18 an hour
- 18 – 20 years will receive a pay increase for The National Minimum Wage from £7.49 to £8.60 an hour
- Under 18s will receive a pay increase for The National Minimum wage from £5.28 an hour to £6.40 an hour
- Minimum Apprentice wage rates will also increase from £5.28 an hour to £6.40 an hour (apprentices under age 19 or apprentices in the first year of their apprenticeship)
Benefits to rise by 6.7% in April 2024
UK residents receiving benefits will see their payments increase by up to 6.7% next year. This is partially due to legal requirements in which specific benefits (disability related) must increase in line with inflation.
Other benefits such as Universal Credit will also increase following discussions by UK ministers, even though mainly claimants will also be working.
Benefits will work differently for residents of Northern Ireland, but it is likely that increases will be applied there as well.
Previous rent support that was available through the benefits system will now return, following the freeze on this in 2020. This is due to the dramatic increase in rental costs for UK residents that has been seen over the past 2 years.
Tobacco and alcohol duty changes
There have been notable increases announced for taxes on tobacco sales in an attempt to discourage smoking. Tobacco duty has been increased 10% making prices for higher now for UK consumers.
Alcohol taxes on the other hand have been frozen until 1st August 2024, to support pubs and restaurants still struggling in the aftermath of the pandemic.
Focus on growing the economy
A main focus for the coming year is to boost the UK economy to battle the effects of high inflation which has been ongoing since the pandemic. The government aim to achieve this by:
- Boosting business investment by £20million per year
- Unlocking investment opportunities by backing British businesses
- Foreign direct investments to increase to aid investments and access to foreign business
- £250,000 off tax bill the following year for every million pounds invested to maximise business investment.
- Plans to increase business investment by £20billion and 1% of overall GDP
Business tax deductions approved
UK businesses will be allowed a ‘full expensing’ tax break which allows companies to deduct costs for new equipment or machinery.
The previous 75% business rate discounts will remain in place for retail, hospitality and leisure business until at least this time next year.
Improvements to UK workforce risk welfare payments for many
There have been 3 reforms announced to improve incentives to work to try and boost the UK economy and workforce. This is due to the announcement that 7 million adults of working age are not working, with 1 million vacancies across the country.
There has been a back to work plan proposed for the UK fit not process to improve access to job for the 100,000 people signed off on sickness and disability benefits.
More generally, after 18 months of unemployment anyone on benefits looking for employment will be provided a mandatory skills program to improve opportunity to get work. However, unemployment benefits can then be removed if you do not co-operate with this programme and look for work within 6 months.
Other key announcements
Some of the other main announcements and comments from today’s budget were:
- Economic growth in the next year will be lower than previously predicted with growth of only 0.7% (1.8% was the figure previously forecast)
- Clean Energy businesses to be able to get quicker access to the UK grid access and reduce energy delays by 90%.
- Labour has stated that the cut in taxes will not do enough to compensate for the increases that have already occurred
- There are plans for the public sector to increase productivity growth to pre-pandemic levels, particularly in the NHS and civil service
- School and education reforms have been proposed which set a target for all school leavers achieve minimum standards set out by the scheme
- Planning and infrastructure project application approvals will allow local authorities to recover all costs for planning applications for faster approval times
- House building targets to unlock more investment to deliver high quality nutrient mitigation schemes
- Government to spend £1.3billion over the next 5 years to help people with health conditions find work
What wasn’t discussed in the Autumn 2023 budget?
There were some factors and topics that were notably missing from the Autumn 2023 budget announcement today.
Many people were hoping for updates around whether the government’s cost of living support payments are set to continue past Spring 2024. So many UK homeowners have been reliant on these payments so the lack of clarity here is disappointing.
There was also no mention of VAT even though the Office for Budget Responsibility have stated that taxes will inevitably increase.
There was also no discussion of how homeowner and potential mortgage borrowers will be supported over the next year. It’s now believed that house prices which have been set to increase 0.9% by the end of 2023 will fall dramatically by 4.7% throughout 2024.
While this will be great news for buyers (and first time buyers in particular), it won’t be welcome news for those who are looking to sell.
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