On Wednesday, November 22, 2023, both enthusiasts and questioners eagerly awaited the unveiling of the Chancellor’s Autumn Statement. This announcement unfolded with strategic precision, as Jeremy Hunt meticulously outlined 110 policy measures aimed at securing significant political victories within the confines of self-imposed fiscal boundaries. In this article we will delve into the key revelations and their potential impact on various sectors!
Three Pivotal Factors Influencing Potential Tax Adjustments:
- Inflation: Prime Minister, Rishi Sunak pledged to halve inflation by the end of 2023, standing at 4.6% in October 2023 compared to over 11% the previous autumn. Although claiming credit for the progress, some argue that the government’s influence on inflation is limited.
- Debt and Borrowing: In spite of October marking the second-highest state borrowing costs, the Chancellor adhered to his fiscal rules, reducing overall debt to £16.9 billion less than the Office for Budget Responsibility’s forecast of £115.2 billion.
- Economy: Contrary to expectations, the UK’s economy demonstrated resilience, with the OBR revising its prediction for the current financial year from a projected 0.2% decline to a growth of 0.6%. Future years saw a downward revision to growth expectations, that could pose a challenge for another government to address.
Measures Aimed at Garnering Public Approval:
- National Minimum Wage: The Chancellor established plans to increase the National Living Wage, with the most significant boost of 9.8%, raising it from £10.42 per hour to £11.44 per hour. The age threshold for eligibility is also lowered to 21, and other wage brackets see increases, effective from 1st April 2024.
- State Pension: Despite concerns, the Chancellor maintained the pension triple lock pledge, resulting in an 8.5% increase in the State Pension & Pension Credit in April 2024.
- R&D Tax Credits: While the inclusion of R&D tax credits was anticipated, the lack of new revelations disappointed many. The Chancellor reiterated the commitment to increase R&D spending by £20 billion by 2024/25, with no changes from the April 2023 adjustments.
- Business Rates: To support small businesses and local high streets, the Chancellor allocated a £4.3 billion package over the next five years, including freezing the small business multiplier and extending RHL relief. However, details regarding the duration of the relief extension remain unclear.
- Full Expensing: In a bid to boost investment, the Chancellor made full expensing permanent, allowing businesses to deduct 100% of qualifying equipment costs from their profits in the same tax year.
- National Insurance Changes: The Chancellor confirmed the abolition of Class 2 National Insurance for self-employed, a 1% reduction in Class 4 NI (applicable to earnings over £9,569), and a decrease in Class 1 NI for employed workers from 12% to 10%, with the latter coming into effect from January 6, 2024.
It is important to note the absence of mentions regarding inheritance tax and income tax in the declaration. Even with widespread speculation about plans to eliminate inheritance tax, these details were not disclosed. The Shadow Chancellor of the Labour Party has raised questions about whether these plans are intentionally deferred for a more impactful reveal, possibly closer to the next general election, or if they have been abandoned altogether. Additionally, there was a conspicuous lack of information on any changes to income tax thresholds and personal allowances in Hunt’s proposals.