The Chancellor announced his Autumn Statement on Wednesday 22nd November. As expected, tax cuts took most of the headlines, with a reduction in National Insurance and a range of measures for businesses. In this special edition of Citrus Bites, Richard Harris takes a look at the headlines and considers what the announcements could mean for the economy.
The main headlines
Taxation
- Main rate of National Insurance cut from 12% to 10% from 6 January
- Class 2 National Insurance – paid by self-employed people earning more than £12,570 – abolished from April
- Class 4 National Insurance for self employed – paid on profits between £12,570 and £50,270 – cut from 9% to 8% from April
National Living Wage
- Legal minimum wage – known officially as the National Living Wage – to increase from £10.42 to £11.44 an hour from April
- New rate to apply to 21 and 22-year-old workers for the first time, rather than just those 23 and over
Pensions & Benefits
- State pension payments to increase by 8.5% from April, in line with average earnings
- This will set the uplift for next year’s full State Pension payment (for those reaching state pension age from 6 April 2016), which will increase to £221.20 per week, or £11,502.40 per year. This level of uplift follows the inflation matching 10.1% boost that saw the 2023/24 state pension rise to £203.85 a week, or £10,600 annually.
- Universal Credit and other working-age benefits to increase by 6.7% from April, in line with September’s inflation rate
- Local Housing Allowance rates – which determine the level of housing benefit and Universal Credit people receive to pay rent – to be unfrozen and increased to 30% of local rents
ISAs
- From April 2024, savers will be able to hold more than one of a particular type of ISA in a year. Under current rules you can only pay into one of each type of ISA in a tax year
- The age you can apply for an adult cash or stocks and shares ISA is raised to 18. This now aligns with Junior ISAs. It then makes the multiple ISA subscriptions easier to implement.
Economy
- The Independent Office for Budget Responsibility (OBR) expects the economy to grow by 0.6% this year and 0.7% next year, rising to 1.4% in 2025; then 1.9% in 2026; 2% in 2027 and 1.7% in 2028
- It forecasts that headline inflation – the rate prices are rising – will fall to 2.8% by the end of 2024 and to the Bank of England’s 2% target rate in 2025
- However it also says: Living standards, as measured by real household disposable income (RHDI) per person, are forecast to be 3½ per cent lower in 2024-25 than their pre-pandemic level. While this is half the peak-to-trough fall we expected in March, it still represents the largest reduction in real living standards since ONS records began in the 1950s.
Business
- “Full expensing” tax break – allowing companies to deduct spending on new machinery and equipment from profits – made permanent
- The 75% business rates discount for retail, hospitality and leisure firms extended for another year
- Households living close to new pylons and transmission infrastructure to get up to £1,000 a year off energy bills for a decade
- Funding of £4.5bn to attract investment to strategic manufacturing sectors, including green energy, aerospace, life sciences and car-making
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