Autumn Statement 2023: Key Takeaways for Accountants

The Autumn Fiscal Update 2023, presented by Chancellor of the Exchequer Jeremy Hunt in the House of Commons today, outlines the government’s fiscal strategies impacting tax, spending, and public services in the UK. For a comprehensive review of the Autumn Fiscal Update, please refer to the official government website.

In the pursuit of bolstering the UK economy, Chancellor Hunt has articulated key fiscal measures. Let’s look at some of the key takeaways for accountants:

TAX AND REMUNERATION

National Minimum Wage

Effective April, the National Minimum Wage (commonly referred to as the National Living Wage) will rise from £10.42 per hour to £11.44 per hour—an increase of £1.02 per hour. Notably, this rate will now apply to individuals aged 21 and 22, expanding the scope beyond those aged 23 and over. Individuals under 21 will receive a lower minimum wage, albeit with an increase mirroring the lowest legal pay for apprentices.

For individuals aged 18 to 20, the minimum hourly wage will be £8.60, marking an increase of £1.11. Those aged 16 and 17 and apprentices will see their minimum pay rise to £6.40—an increase of £1.12 from the previous year.

National Insurance

Effective January 6th, employees earning over £12,570 annually, currently subject to a 12% National Insurance rate on earnings up to £50,270, will witness a reduction to 10%, impacting over 27 million workers.

Self-employed individuals will benefit from reforms to National Insurance payment methods, saving approximately 2 million individuals an average of £350 annually. Starting April, Class 2 National Insurance for self-employed individuals earning over £12,570 will be abolished, and Class 4 National Insurance on profits between £12,570 and £50,270 will be reduced from 9% to 8%.

PENSIONS

Commencing April, state pension payments will experience an 8.5% increase to £221.20 per week, equating to an additional annual income of nearly £900. The commitment to the triple lock, indexing state pensions to the highest of average earnings growth, CPI inflation, or 2.5%, will be honoured in its entirety.

Additionally, the government pledges to institute a pension pot for life scheme, enabling workers to designate their employer-contributed funds to a lifelong fund, providing portability throughout their careers.

SOCIAL WELFARE

Chancellor Hunt unveiled a comprehensive set of welfare reforms, allocating over £1.3 billion over the next five years to assist individuals with health conditions in securing employment. An additional £3.3 billion will be dedicated to aiding those unemployed for over a year.

Universal Credit and other working-age benefits will experience a 6.7% increase from April, aligning with September’s inflation rate. Stricter work-search requirements will be imposed on benefit claimants, including mandatory work experience after 18 months of unemployment. Reforms to the Work Capability Assessment will reflect the newfound prevalence of remote work post-COVID-19.

Local Housing Allowance rates, stagnant since 2020, will be augmented to 30% of local rents, potentially yielding up to £800 for qualifying households.

BUSINESS AND INFRASTRUCTURE

Chancellor Hunt confirmed the permanency of the “full expensing” tax break, enabling companies to offset investments in machinery and equipment against tax.

The 75% business rates discount for retail, hospitality, and leisure businesses has been extended for an additional year.

Approximately £4.5 billion in funding will be allocated to attract investments in strategic manufacturing sectors, including aerospace, green energy, car manufacturing, and life sciences. The collective business measures outlined are anticipated to stimulate a 1% increase in business investment as a percentage of GDP.

ADDITIONAL MEASURES

Households near new towers and transmission infrastructure will benefit from a £1,000 annual reduction in energy bills for ten years.

All alcohol duties will remain frozen until August 1st of the following year.

£5 million in funding has been earmarked for establishing a Fleming Centre at Imperial College and Imperial College Healthcare NHS Trust, focusing on health innovations.

Over the next three years, up to £7 million will be allocated to organisations such as the Holocaust Educational Trust to combat antisemitism in universities and schools.

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