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24 November 2023

The Chancellor's Autumn Statement: A Short Summary

The chancellor unveiled the government’s financial plans for the country yesterday in an Autumn Statement that promised to put money back in the public’s pockets. Jeremy Hunt’s budget introduced some key policies that will impact the nation’s finances:

National Insurance

Tax cuts were hotly anticipated in the run up to the announcement, and Hunt introduced a reduction in National Insurance rates. Currently, National Insurance Contributions (NICs) are paid at a rate of 12% on earnings between £12,570 and £50,268, and 2% thereafter. The 12% band will reduce to 10% from the 6th of January, a change that will see an individual on an average salary of £35,000 save £450 a year according to the chancellor.

Income tax thresholds and rate remain unchanged following the statement.

Pensions

The chancellor confirmed the government will stick to the so-called triple lock for state pensions, meaning that in April the weekly basic state pension will increase from £204 to £221 - 8.5% in line with average earnings. Under the triple lock, state pensions increase in line with the highest of average earnings, inflation or 2.5%. Last year saw an increase of over 10% as pensions rose with inflation.

Minimum Wage and Benefits

Those on the lowest incomes will see a pay rise in April, as the chancellor confirmed that the National Living and Minimum Wages will increase to reflect the higher cost of living. A range of benefits, such as disability payments and universal credit will increase in line with inflation by 6.7% in April.

Economy

The chancellor used the Autumn Statement to share an update on price rises, highlighting that the Office for Budget Responsibility expects the rate of inflation to drop to 2.8% by the end of 2024. The OBR expects inflation to reach the Bank of England’s 2% target during 2025.

The OBR expects the UK GDP (a measure of an economy’s productivity) to rise by 0.6% this year and 0.7% in 2024, reflecting a lower forecast for economic growth.

Business Tax

The chancellor described this budget as bringing the “biggest business tax cuts in modern history”. He confirmed that “full expensing” measures introduced in the Spring Budget will be made permanent, allowing businesses to offset investment in items such as new IT equipment and factory machinery against tax.

He also announced that Class 2 National Insurance, paid at a flat weekly rate by the self-employed, will be abolished. Class 4 NI contributions, also paid by the self-employed but annually on taxable profits, will be cut by 1%.

The value of investments and the income derived from them can fall as well as rise. You may not get back what you invest.

This communication is for general information only and is not intended to be individual advice. It represents our understanding of law and HM Revenue & Customs practice. You are recommended to seek competent professional advice before taking any action.

Tax and Estate Planning Services are not regulated by the Financial Conduct Authority.

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