We outline the key points from the UK's Budget announcement on 22 November that may affect your tax bill and what you can receive from your pensions, income and savings.
In the lead up to Jeremy Hunt’s Autumn Statement on 22 November, there were rumours that a cut in Inheritance Tax would be the headline grabber... but it didn’t even get a mention. Instead, there were tweaks to National Insurance contributions and the State Pension that will affect millions more people.
Of the 110 measures Hunt says made up his 2023 Autumn Statement, here are the main ones that may affect or be of interest to you and your family.
Pensions
- State Pension to increase by 8.5% from April to match average earnings, making the full weekly rate for those on the new pension £221.20 (an extra £902 a year), or £169.50 for those on the old structure (£692 more a year).
- Hunt will consult on enabling “one pension pot for life”, which would let people move their pension from one job to another to prevent ‘lost’ pensions.
Income
- The main National Insurance (NI) rate will be cut from 12% to 10% from 6th January 2024. For those on an average £35,400 salary, this represents an annual saving of over £450.
- From April, the Class 2 NI for self-employed people will be removed and Class 4 NI payable for profits between £12,570 and £50,270 will drop from 9% to 8%. Taken together, this will save an average £350 a year for self-employed people.
- The National Living Wage will lift by 9.8% to £11.44 an hour for workers aged 21 and over.
Savings
- ISA limits will be frozen at their current rates for 2024/25, but from April there’ll be the option to pay into more than one ISA in a tax year and make partial transfers.
Businesses
- Business rate relief extended for another year.
- ‘Full capital expensing’ made permanent, allowing businesses to offset investment in IT equipment and machinery against corporation tax.
- An extra £500 million funding allocated to "innovation centres to help make us an AI powerhouse”.
Other measures
- Benefit payments to increase by 6.7% in line with September’s inflation rate.
- Alcohol duty frozen until August 2024, but tobacco duty increases immediately.
- Fuel duty is frozen, although the 5p-per-litre reduction brought in last year is due to run out in March 2024.
Economy
- The UK inflation rate dropped to 4.6% in October and is forecast to fall to 2.8% by the end of next year and 2% in 2025.
- Growth of the UK economy is set to be higher than previously expected at 0.6% this year, but has been downgraded for 2024 to 0.7% (from 1.8%).
How it might affect you
For those receiving the State Pension, having the triple lock honoured at the highest possible level is great news. More flexibility around ISAs is also welcome, and the National Insurance changes will put more into your pockets if you’re still working. However, as the allowances and thresholds for Income Tax and NI remain frozen until 2028, more people will enter a higher tax bracket or see a greater proportion of income taxed at higher rates as wages/pensions increase.
While inflation is dropping, the golden 2% target is now a year behind schedule, and with VAT unchanged at 20%, the cost of living remains high.
As usual, a Budget is a good time to check your finances are working as hard as they can, and that you’re making the most of all the available allowances and tax-efficient opportunities available.
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