Autumn Statement: PERSONAL CHANGES
REWARDING HARD WORK
The Government’s new ‘back to work’ plan formed a significant part of the 2023 Autumn Statement. Building on the £7bn employment package introduced earlier this year, the Chancellor says the plan will help more than one million people re-enter the workforce.
Hunt’s package of pay rises, tax cuts and extra support for jobseekers aims to make it easier and more rewarding for people to find work and stay employed. The Government also plans to introduce tougher benefits rules to incentivise more people to “get off benefits and move into work”.
NATIONAL LIVING WAGE RISE
In line with the overarching theme of “making sure work pays”, the Chancellor announced he would raise the National Living Wage (NLW) from £10.42 to £11.44 per hour in April 2024. This marks the largest ever cash increase since the rate was introduced in 2016, and means a full-time worker on the NLW will earn more than £1,800 extra a year.
Hunt also unveiled plans to reduce the age threshold for the National Living Wage (NMW) from 23 to 21. As a result, all 21 and 22-year-olds currently on minimum wage will receive a particularly significant boost to their income, with their hourly wages rising from £10.18 to £11.44.
The minimum wage for 18 to 20-year-olds will also rise from £7.49 to £8.60 an hour, while the minimum hourly rate for apprentices is set to increase by over 20% from £5.28 to £6.40 an hour.
According to Hunt, these measures will effectively “end low pay” in the UK, directly benefitting around 2.7m low-paid workers nationwide.
CLASS 1 NATIONAL INSURANCE CONTRIBUTIONS
The Chancellor waited until the end of his speech to announce a 2% cut to the main rate of National Insurance – a move which is set to benefit 27 million people.
Unusually, rather than waiting until the start of the new tax year, the change will be implemented for paydays on or after 6 January 2024. Where employers are unable to change their systems in time, they are permitted to make the change at the earliest opportunity with appropriate adjustments in respect of overpayments.
This reduction will only apply to annual earnings between £12,570 and £50,270, meaning that the maximum saving is £754 a year, while the average worker on £35,400 salary will be £450 better off. Those interested in additional examples can consult the Government’s factsheet, which lists cases including, among others, a senior nurse, an average full-time nurse and an average police officer.
Individuals will still be able to pay voluntary Class 3 NICs should they wish to do so in order to fill gaps in their National Insurance record and thereby enhance their state pension. The weekly Class 3 rate will remain at £17.45 next year.
EFFECTS ON INDIVIDUALS AND BUSINESSES
While many individuals will take home larger pay packets thanks to the measures announced in the Autumn Statement, current threshold freezes are still pulling more people into higher tax bands.
Indeed, the OBR’s report predicted that personal threshold freezes will raise a total £46bn a year for the Treasury by 2028 as wages rise with inflation.
Some industry experts have expressed concern about the impact of the NLW increase on employers. In October 2023, company insolvencies in England and Wales rose by 18% compared to the same period a year earlier. As a result, the measure could put significant financial strain on businesses as they continue to struggle with high operating costs.
James Lowman, chief executive at the Association of Convenience Stores (ACS), said the measure would be “tough for many local shops to afford”, citing employee wages as the biggest expense for most retailers.
OTHER PERSONAL ANNOUNCEMENTS
BENEFITS
Universal Credit payments and other welfare benefits will be increased by 6.7% next April. This increment translates into an additional £470 a year for about 5.5 million households.
Other changes to benefits were among Hunt’s most controversial, including:
Incentivising work for benefits claimants: The Chancellor plans to push 200,000 people into work, focusing on the sick and disabled. This includes mandatory work placements and stopping benefits for those not actively seeking employment.
Stricter benefits sanctions: There will be harsher benefits rules and sanctions, particularly affecting people who cannot work due to disabilities, illness, or
care responsibilities.
Impact on disabled and vulnerable individuals: The Government plans to tighten the Work Capability Assessment, making it more challenging for individuals to access additional money and protection from benefit sanctions.
PENSIONS TRIPLE LOCK
Despite reports to the contrary, the Chancellor remained committed to the ‘triple lock’ on pensions, meaning that pension payments will rise by 8.5% next April.
Under the triple lock, the Government is supposed to increase the state pension each tax year by either the previous September’s rate of inflation (6.3%), the rate of wage growth (8.5%), or 2.5%, whichever is higher.
Announcing the decision, Hunt said:
“There have been reports we would uprate the triple lock by a lower amount to smooth out the effect of high public sector bonuses in July, but that would have been particularly difficult for 1m pensioners whose only income is from the state.
“So instead, today we honour our commitment to the triple lock in full.”
HOUSING AND PRIVATE RENTS
In response to the housing crisis, the local housing allowance rate will be increased to cover the lowest 30% of market rents. This measure is expected to benefit
1.6 million households, with an average support of £800 per household next year.
SUPPORT FOR THE SELF-EMPLOYED
Acknowledging the important role small businesses play in the UK economy,
the Chancellor announced measures to reward self-employed individuals for their hard work.
These changes included eliminating Class 2 National Insurance and reducing Class 4 National Insurance from 9% to 8%. According to Hunt, these measures will save self-employed individuals an average of £350 annually.
In December 2022, it was announced that the introduction of Making Tax Digital for income tax self assessment (MTD ITSA) for landlords and the self-employed would be staged. Those with income over £50,000 will come in first from April 2026, and those with between £30,000 and £50,000 will come in a year later in April 2027.
It’s now been confirmed that those with income under £30,000 will not be brought into MTD ITSA for now. However, this decision will be kept ‘under review’, so there’s every chance the threshold could come down in the future.