Today on 22nd November 2023 the Chancellor of the Exchequer, Jeremy Hunt, laid out his budget for the UK economy to the House of Commons. The main underlying message to this budget was that he is making the “biggest tax cuts in modern British history” so that they can “make work pay”. Let’s see what you think of his announcements.
Cost of Living
Universal Credit
The Government have long been criticized that universal credit payments have not been increased in line with inflation, forcing those on the lowest incomes into deeper poverty. Today it was announced that universal credit payments will be increased by 6.7% with effect from April 2024. This increase is in line with the rate of inflation from September, thereby making it higher than the current rate of inflation which is 4.6%.
Alcohol Duties
Alcohol duties have been frozen until 1 August 2024.
Pension Income
State pension payments are set to be increased from April 2024 by 8.5%. This is well above the current rate of inflation and should help towards funding the current costs of living.
Employee Taxes
National Insurance
Employees earning above £12,570 per year are currently liable to pay class 1 employees national insurance of 12%. Mr Hunt announced that this rate will be reducing to 10%. He would usually make this change at the start of a new tax year (i.e. 6th April 2024), but he is pushing through reforms tomorrow to allow this change to be effective from 6th April 2024. This means that employees will see an increase in their take home pay as soon as January 2024.
National Living Wage
Two big changes have been announced with regards to the national living wage:
- Currently you are only entitled to the headline rate of national living wage if you are aged 23 and above. From April 2024 employees aged 21 and above will now be able to access this rate of pay.
- The headline rate of national living wage will increase from £10.42 to £11.44 per hour with effect from 1 April 2024. This is the biggest single increase in national living wage in modern British history. Great news for those in receipt of the increase, but could be problematic for the small business owners who now have to find the additional funds to pay these rates.
Small Business Taxes
Full Asset Expensing
Full asset expensing was introduced earlier this year in the Spring Budget. It allows companies to fully expense their asset expenditure against their trading income, enabling them to reduce their liabilities to corporation tax in an effective way that encourages re-investment into the business. This measure was originally introduced as a temporary measure, but it has been announced today that this is now a permanent change to small business taxes.
Business Rates
There were two main announcements to business rates and they were:
- The small business rates multiplier has been frozen for another year.
- Businesses operating in the retail, hospitality and leisure sectors currently benefit from a 75% discount in business rates, and this is set to continue for another year.
National Insurance for the Self-Employed
If you are an individual with sole trade self-employed income of more than £12,570 per year, you will more than likely be paying both class 2 and class 4 national insurances. Class 2 national insurance is a flat rate of £3.45 per week, and class 4 national insurance is a percentage of your sole trade profits (currently 9%). With effect from April 2024 class 2 national insurance will be abolished and class 4 national insurance will be cut to 8%. This will be welcomed news for those self-employed individuals who will see a potential monetary benefit likely in excess of £179.40 per year as a result of these changes.
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