Autumn Statement 2023 – what it means for you

Background to the Autumn Statement 2023

To say a lot has happened in politics over the last year or so is certainly an understatement. When Chancellor Jeremy Hunt delivered his Autumn Statement in 2022, it was against a background of turmoil. In the wake of his predecessor’s Mini Budget two months earlier, aggressive tax cuts combined with a generous energy bills support package caused turmoil in the markets. Inflation shot up, the pound collapsed and the Bank of England had to pour £65 billion into the government bond markets.

Last year’s Autumn Statement was thus designed to steady the financial ship. It also increased the tax take. The threshold for additional rate Income Tax dropped, bringing more people into the 45% rate. Dividend tax-free allowances were set to halve to £1,000 this financial year. They were supposed to halve again to £500 from April 2024. CGT allowances were slashed from £12,300 to £6,000. They were set to drop again to £3,000 in the 2024/5 financial year.

In addition, Hunt froze personal tax thresholds until 2028, delivering a real-terms tax rise. Before the Autumn Statement, he’d already reversed the decision not to increase Corporation Tax on a tapered scale between 19% and 25%.

Tax cuts on the horizon?

If last year’s statement was about reassuring the markets, this year is rather different. The government has to call a general election by January 2025 at the latest. The Conservative Party is trailing Labour in the polls by a significant margin. Time is running out to build up enough winning support for an election that many widely believe will take place next autumn.

Against this backdrop, and given that inflation has now halved this year, it was widely expected that the Jeremy Hunt would deliver tax cuts in the Autumn Statement 2023. Indeed, the media widely predicted a cut to National Insurance. We followed the Chancellor as he delivered the statement and have summarised the key announcements below.

Autumn Statement 2023: key announcements

Opening his speech, the Chancellor said he was going to deliver an ‘Autumn Statement for Growth’.

He said that it was a package of 110 growth measures, designed to boost business investment by £20 billion per year. He also said that these measures are intended to bring down inflation from the current level of 4.6%, which has more than halved since Rishi Sunak took office.

While Mr Hunt didn’t announce all 110 measures, these are the ones that are likely to grab the headlines.

Pay

• The National Living Wage will increase to £11.44 per hour, nearly a 10% rise.
• The 12% rate of Employee National Insurance will drop to 10% on 6th January 2024. This is equivalent to a £450 tax cut for someone earning £35,400.

Self Employed

• Class 2 National Insurance will be abolished from April 2024. This currently stands at £3.45 per week, resulting in a £192 saving per year. Abolishing class 2 NICs will not affect pension or benefits entitlement
• Class 4 National Insurance rate will be cut. From April 2024 it will drop from 9% to 8%.

Pensions

• The state pension and pension credit will increase by 8.5%. This is because the ‘triple lock’ has been retained in full.
• Workers will get the right to require employers to pay pension contributions into an existing pension pot.

Business

• Full expensing will be made permanent. Companies that invest in the UK will reduce their tax by up to 25p for every £1 they spend on plant and machinery. This is forecast to increase business investment by £20bn per year, or nearly 1% of GDP.
• £4.5 billion to attract investment to UK manufacturing. Supported sectors will include aerospace, zero emissions vehicles, life sciences, carbon capture, utilisation and storage, electricity networks, hydrogen, nuclear and offshore wind.
• Late payments. Any company bidding for large government contracts will have to provide evidence they pay suppliers within 55 days. This will reduce to 30 days in the future.
• Business rates relief extended for another year. This will mean retail, hospitality and leisure businesses retain a 75% discount.
• Investment Zone programme extension, plus new zones in the West Midlands, East Midlands and Greater Manchester, with another in Wrexham and Flintshire.
• Freeport tax relief extension – from 5 years to 10 years.
• £50m to pilot ways of boosting apprenticeships in engineering and other high-value fields

Energy

• Up to £1k off energy bills for people living near new electricity infrastructure.

Benefits

• Universal Credit and other benefits will rise by 6.7%.
• Local Housing Allowance increased. 1.6 million people to get an extra £800 next year towards their rent.
• Extra support (and sanctions) for jobseekers. The sick note system will be changed to assume people can work. More support will be offered to people looking for work. If someone doesn’t find work in 18 months, they will have to undertake mandatory work experience. If people refuse, their benefits will be stopped.

Sin taxes

• All alcohol duty frozen until August 2024 in a measure particularly designed to help pubs.

Planning

• Councils will be able recover full costs of planning applications – if they meet prompt deadlines.
• Plans will be announced to shrink the planning backlog.
• The government will consult on a law to allow converting any house into two flats, if the exterior is unchanged.

HMRC

• The taxman will get extra resources to raise an additional £5bn over the forecast period – making sure everyone pays the tax they owe.

Other

• An additional £10 million to support veterans – to help reduce suicides and self-harm via mental health services.
• £7 million to combat antisemitism in schools and universities.

What do the changes mean for you?

Given that the Chancellor has only just announced these measures, we’ll be spending the next days and weeks looking at how they will affect our clients. Keep an eye on this blog for more detailed insights on the changes announced in the Autumn Statement 2023.