As the autumn leaves fell, Chancellor Jeremy Hunt unveiled a fiscal landscape brimming with optimism in his Autumn Budget 2023.
In stark contrast to the sombre tone of the previous year, where tax rises loomed, Hunt’s speech this year offered a fiscal pick-me-up for the nation.
Armed with a £27 billion fiscal windfall, the Chancellor steered away from storm warnings, choosing instead to announce tax cuts and incentives to stimulate business investment.
What was in the Autumn Budget 2023?
National Insurance cuts: A welcome surprise
In a surprising twist, the Chancellor left the cut to employee National Insurance until the end of the speech, revealing it would be implemented from January 6, 2024.
The reduction, from 12% to 10%, is expected to benefit 27 million workers, providing an average annual saving of over £1,000 for the average worker in 2024/25.
For the self-employed, the abolition of class 2 NICs and the reduction of class 4 NICs from 9% to 8% were welcomed changes. These reforms are estimated to save around two million self-employed individuals an average of £350 per year.
Individual focus: National Living Wage and ISAs
Individuals were not overlooked in the Autumn Statement. Apart from the National Insurance cuts, the National Living Wage increase, particularly for those aged 21 and over, aims to alleviate financial pressure on lower earners. However, concerns linger about the potential strain on businesses already grappling with financial challenges.
To encourage UK investment, Hunt introduced significant changes to ISAs, heralding the most substantial reforms in over a decade. These adjustments, focusing on fractional shares and long-term asset funds, precede an impending increase in the tax-free savings allowance threshold.
Business investment and R&D: Key pillars of growth
Hunt positioned business investment as a cornerstone of the Autumn Budget 2023. The unexpected tax receipts allowed him to make the full expensing scheme permanent, providing businesses with confidence for long-term investments. The Chancellor declared this move as the “biggest ever boost for business investments in modern times”.
Simplification in the Research and Development (R&D) tax relief scheme was also on the agenda, with the merger of the R&D expenditure credit and SME scheme. While welcomed by the business community for providing certainty, critics argue that the scope of relief excludes certain assets and may result in future tax liabilities.
Economic outlook and interesting omissions
Throughout the speech, Hunt emphasised initiatives and tax cuts aimed at boosting economic growth. The Office for Budget Responsibility’s prediction of a fall in headline inflation to 2.8% by the end of 2024 and an underlying debt of 91.6% of GDP next year were highlighted as positive indicators.
The Chancellor also pledged additional resources for HMRC to ensure tax compliance, which could potentially raise an additional £5bn for the Treasury.
However, notable omissions include changes to thresholds and the untouched 2% NIC rate on higher earnings. The lack of news on inheritance tax, for example, suggests that this topic might be reserved for the Spring Budget or an election manifesto.
Conclusion: A glimpse into economic resilience
As the Autumn Statement unfolded, Chancellor Jeremy Hunt painted a picture of economic resilience, propelled by unexpected fiscal headroom. The tax cuts, incentives for business investment, and measures to support individuals underscore a commitment to economic growth.
While some may lament the omission of certain tax changes, the Chancellor’s strategic focus on immediate fiscal concerns and potential electoral ramifications suggests that more rabbits may emerge from the hat in the upcoming Spring Budget.
As we navigate these fiscal landscapes, rest assured that we are here to guide you through the intricacies and implications of your financial journey. Contact us to discuss the Autumn Budget 2023 today.