In the Autumn Budget 2023, the UK Chancellor Jeremy Hunt announced plans to reduce debt and cut taxes, with the Office for Budget Responsibility (OBR) assessing that these measures will lower inflation and boost GDP.
In part, the Conservatives are trying to rebuild their reputation in the lead up to the next general election. The Chancellor Jeremy Hunt made it clear he was starting to reduce the burden on businesses and families.
Key highlights from the Autumn Budget 2023 (full summary below)
Cut national insurance by two percentage points for 27 million people
NI also cut by an average £350 a year for two million self-employed
Permanent plan for firms to cut tax bills if investing in new equipment
Universal credit and other benefits will increase by 6.7%
State pension will rise by 8.5% in line with average earnings.
£1.3 billion of funding to offer ‘extra help’ to 300,000 unemployed.
£7million over three years for organisations to tackle antisemitism.
Alcohol duties frozen until August 2024
75% business rates relief for retail, hospitality and leisure until 2025
Insisting that ministers have had chosen to ‘reject big government, high spending and high tax’, the Autumn Budget 2023 statement gave 28million working Brits a relief by cutting the main national insurance rate from 12 per cent to 10 per cent, starting in January 2024. It will save a worker on a £35,000 salary £450 a year.
In addition, a huge £10billion-a-year tax break for firms will be made permanent, with the Chancellor saying it is the ‘largest in modern British history’. The reductions were described as the ‘biggest package of tax cuts to be implemented since the 1980s’. They are equivalent to roughly 0.7 per cent of GDP.
Most of the package is focused on growth, including measures to encourage pension funds to invest in the UK and plans to offer families living near the pylons needed to upgrade the national grid up to £1,000 a year off energy bills.
Mr Hunt predicted the measures will ‘increase business investment in the UK economy by around £20billion a year over the next decade’.
National Living Wage and Minimum Wage Increase
The news came as the Treasury announced plans to increase the National Living Wage by more than a pound an hour from next April.
The rate – which will also be extended to 21-year-olds for the first time – will rise from £10.42 to £11.44.
National minimum wage for 18 to 20-year-olds will also increase by £1.11 to £8.60 per hour, the Government has said.
Apprentices will have their minimum hourly rates boosted, with an 18-year-old in an industry like construction seeing their minimum hourly pay increase by over 20 per cent, going from £5.28 to £6.40 an hour.
There will also be a drive to get millions of people off benefits and back to work. Earlier this month, we reported on plans to impose tougher sanctions on those who claim unemployment benefits.
The Department for Work and Pensions plans to withdraw free prescriptions and dental treatment from those who refuse to engage with efforts to find them a job.
Across Britain, 1.57million people are in receipt of Jobseekers Allowance, Universal Credit or both – the Chancellor’s plans are expected to target around 1.1million of those, including those with long-term health conditions.
National Insurance
The Chancellor said he was abolishing the ‘Class 2’ National Insurance charge for self-employed people earning more than £12,570 – which is a flat rate of £3.45 a week.
That will save the average self-employed person £192 a year, and ‘Class 4’ NICs on all earnings between £12,570 and £50,270 is also going down from 9 per cent to 8 per cent.
‘Taken together with the abolition of the compulsory Class 2 charge, these reforms will save around two million self-employed people an average of £350 a year from April,’ says Hunt.
From 6 April 2024, self-employed people with profits above £12,570 will no longer be required to pay Class 2 NICs but will continue to receive access to contributory benefits including the State Pension.
Those with profits between £6,725 and £12,570 will continue to get access to contributory benefits including the State Pension through a National Insurance credit without paying NICs as they do currently
Those with profits under £6,725 and others who pay Class 2 NICs voluntarily to get access to contributory benefits including the State Pension, will continue to be able to do so
Extending the National Insurance contributions (NICs) relief for hiring veterans
The government has extended the NICs relief for employers who hire former members of the UK regular armed forces until 5 April 2025. This provides a relief to employers on the secondary Class 1 NICs due on the wages of veterans for the first 12 months of their first civilian employment. The relief applies to earnings up to the Veterans Upper Secondary threshold, which is £967 per week.
Capital Allowances–permanent full expensing
At Spring Budget 2023, the government introduced two new temporary first-year allowances. For qualifying expenditure on the provision of plant or machinery incurred on or after 1 April 2023 but before 1 April 2026, companies can claim a 100% first-year allowance for main rate expenditure – known as full expensing – and a 50% first-year allowance for special rate expenditure
Today’s announcement makes full expensing and the 50% first-year allowance permanent by removing the expiry date of March 2026.
Making Tax Digital (MTD) for Income Tax Self Assessment (ITSA) design changes
The government will make design changes to MTD for ITSA, simplifying and improving the system for taxpayers and their representatives. The requirement to provide an End of Period Statement will be removed and some taxpayers, including those without a National Insurance number, will be exempted from MTD. Taxpayers who are using MTD will be able to be represented by more than one tax agent. Draft regulations will be published for technical consultation later in 2023.
Off-Payroll Working (IR35) – calculation of PAYE liability in cases of non-compliance
The government will legislate in Finance Bill 2023 to enable organisations to reduce their additional PAYE liability under the off-payroll working rules, to account for Income Tax and Corporation Tax already paid by a worker and their intermediary where a client organisation has been found to be non-compliant with the rules. The changes will take effect from 6 April 2024.
The Autumn Budget 2023 Summary & other developments:
The Chancellor intends to reduce business taxes.
Welfare benefits will be increased by 6.7%, aligning with expectations.
There will be increased support for housing costs through the local housing allowance.
UK Chancellor Hunt has announced a freeze on all alcohol duties until August 1st, 2024
There is a plan to increase pension allowance by the full triple lock commitment of 8.5%
The headline debt is expected at 94% of GDP by the end of the forecast horizon (FY 27/28)
To create new simplified R&D tax relief
UK to extend 75% business rated discount for retail, hospital and leisure.
To make full expensing tax breaks for business will be made permanent
Reduces the main 12% rate of employee national insurance to 10% (to same $450 per average worker.)
NatWest shares will be offered to the public in a move with echoes of Thatcher’s ‘Tell Sid’ campaign privatising British Gas in the 1980s. ‘It’s time to get Sid investing again,’ said Mr Hunt;
The OBR forecasts that inflation will fall to 2.8 per cent next year, and only reach the Bank of England’s 2 per cent target by 2025;
The economy is predicted to grow by 0.6 per cent this year and 0.7 per cent in 2024 – faster than the Bank of England anticipates;
The Chancellor said he would hit his fiscal rule of having debt falling as a proportion of GDP over a five year horizon. But the OBR said targets were only being met because it assumed fuel duty will increase by RPI and the temporary 5p cut will be dropped – neither of which are likely;
The Chancellor confirmed single lifetime pension pot reforms, saying they could free up £75billion of finance for high-growth companies, and provide £1,000 a year extra for an average earner in retirement;
Those living near new electricity pylons could get up to £1,000 per year off their bills;
Tax relief for Freeports and investment zones is being extended to 10 years, with four new zones in the West Mids, East Mids, Greater Manchester and Wales.
Office for Budget Responsibility (OBR)
The UK’s Office for Budget Responsibility (OBR) confirms that the target of Public Sector Net Borrowing (PSNB) below 3% in the 2028/29 reference period has been achieved.
The fiscal headroom is noted at GBP 13 billion, which is significantly lower than the post-2010 average of GBP 29.7 billion typically available to Chancellors.
The medium-term fiscal outlook has seen a considerable improvement compared to the situation in March 2023.
The fiscal headroom of GBP 13 billion is largely attributed to the rolling nature of the budget rule, which provides an additional year.
The tax burden is projected to increase annually, reaching a post-war high of 37.7% by the fiscal year 2028-29.
UK OBR Forecasts for CPI (Consumer Price Index) Year-over-Year:
2023: Expected at 7.4%, with a March 2023 estimate of 6.1%.
2024: Forecast at 2.8%, compared to an expected 3.0% and a March 2023 estimate of 0.9%.
2025: Projected at 2.0%, aligning with an expected 2.0% and a March 2023 figure of 0.1%.
2026: Expected at 2.0%, with a March 2023 estimate of 0.5%.
2027: Anticipated at 2.1%, with a March 2023 estimate of 1.6%
Autumn Budget 2023
In the Autumn Budget 2023, the UK Chancellor Jeremy Hunt announced plans to reduce debt and cut taxes, with the Office for Budget Responsibility (OBR) assessing that these measures will lower inflation and boost GDP.
In part, the Conservatives are trying to rebuild their reputation in the lead up to the next general election. The Chancellor Jeremy Hunt made it clear he was starting to reduce the burden on businesses and families.
Key highlights from the Autumn Budget 2023 (full summary below)
Insisting that ministers have had chosen to ‘reject big government, high spending and high tax’, the Autumn Budget 2023 statement gave 28million working Brits a relief by cutting the main national insurance rate from 12 per cent to 10 per cent, starting in January 2024. It will save a worker on a £35,000 salary £450 a year.
In addition, a huge £10billion-a-year tax break for firms will be made permanent, with the Chancellor saying it is the ‘largest in modern British history’. The reductions were described as the ‘biggest package of tax cuts to be implemented since the 1980s’. They are equivalent to roughly 0.7 per cent of GDP.
Most of the package is focused on growth, including measures to encourage pension funds to invest in the UK and plans to offer families living near the pylons needed to upgrade the national grid up to £1,000 a year off energy bills.
Mr Hunt predicted the measures will ‘increase business investment in the UK economy by around £20billion a year over the next decade’.
National Living Wage and Minimum Wage Increase
The news came as the Treasury announced plans to increase the National Living Wage by more than a pound an hour from next April.
The rate – which will also be extended to 21-year-olds for the first time – will rise from £10.42 to £11.44.
National minimum wage for 18 to 20-year-olds will also increase by £1.11 to £8.60 per hour, the Government has said.
Apprentices will have their minimum hourly rates boosted, with an 18-year-old in an industry like construction seeing their minimum hourly pay increase by over 20 per cent, going from £5.28 to £6.40 an hour.
There will also be a drive to get millions of people off benefits and back to work. Earlier this month, we reported on plans to impose tougher sanctions on those who claim unemployment benefits.
The Department for Work and Pensions plans to withdraw free prescriptions and dental treatment from those who refuse to engage with efforts to find them a job.
Across Britain, 1.57million people are in receipt of Jobseekers Allowance, Universal Credit or both – the Chancellor’s plans are expected to target around 1.1million of those, including those with long-term health conditions.
National Insurance
The Chancellor said he was abolishing the ‘Class 2’ National Insurance charge for self-employed people earning more than £12,570 – which is a flat rate of £3.45 a week.
That will save the average self-employed person £192 a year, and ‘Class 4’ NICs on all earnings between £12,570 and £50,270 is also going down from 9 per cent to 8 per cent.
‘Taken together with the abolition of the compulsory Class 2 charge, these reforms will save around two million self-employed people an average of £350 a year from April,’ says Hunt.
From 6 April 2024, self-employed people with profits above £12,570 will no longer be required to pay Class 2 NICs but will continue to receive access to contributory benefits including the State Pension.
Those with profits between £6,725 and £12,570 will continue to get access to contributory benefits including the State Pension through a National Insurance credit without paying NICs as they do currently
Those with profits under £6,725 and others who pay Class 2 NICs voluntarily to get access to contributory benefits including the State Pension, will continue to be able to do so
Extending the National Insurance contributions (NICs) relief for hiring veterans
The government has extended the NICs relief for employers who hire former members of the UK regular armed forces until 5 April 2025. This provides a relief to employers on the secondary Class 1 NICs due on the wages of veterans for the first 12 months of their first civilian employment. The relief applies to earnings up to the Veterans Upper Secondary threshold, which is £967 per week.
Capital Allowances – permanent full expensing
At Spring Budget 2023, the government introduced two new temporary first-year allowances. For qualifying expenditure on the provision of plant or machinery incurred on or after 1 April 2023 but before 1 April 2026, companies can claim a 100% first-year allowance for main rate expenditure – known as full expensing – and a 50% first-year allowance for special rate expenditure
Today’s announcement makes full expensing and the 50% first-year allowance permanent by removing the expiry date of March 2026.
Making Tax Digital (MTD) for Income Tax Self Assessment (ITSA) design changes
The government will make design changes to MTD for ITSA, simplifying and improving the system for taxpayers and their representatives. The requirement to provide an End of Period Statement will be removed and some taxpayers, including those without a National Insurance number, will be exempted from MTD. Taxpayers who are using MTD will be able to be represented by more than one tax agent. Draft regulations will be published for technical consultation later in 2023.
Off-Payroll Working (IR35) – calculation of PAYE liability in cases of non-compliance
The government will legislate in Finance Bill 2023 to enable organisations to reduce their additional PAYE liability under the off-payroll working rules, to account for Income Tax and Corporation Tax already paid by a worker and their intermediary where a client organisation has been found to be non-compliant with the rules. The changes will take effect from 6 April 2024.
The Autumn Budget 2023 Summary & other developments:
Office for Budget Responsibility (OBR)
UK OBR Forecasts for CPI (Consumer Price Index) Year-over-Year:
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