For anyone who isn’t finance-inclined, days like the Autumn Statement and the Budget can feel like having dozens of meaningless numbers shoved into your face.
Today, Chancellor of the Exchequer Jeremy Hunt revealed more than 100 measures which are hoped to boost growth – including tax cuts, tighter welfare rules, and telling people to ‘find a job’ or see their benefits stopped.
But thankfully, Metro.co.uk’s Consumer Champion Sarah Davidson is here to answer some of your most pressing questions.
Branded as a budget for a spring election, today’s Autumn Statement was packed full of ‘giveaways’ designed to appeal to voters.
Delivering his statement to the House of Commons, Mr Hunt called it ‘a package which leaves government borrowing lower, debt lower, and keeps inflation falling’.
This is the 2023 Autumn Statement and what it means for you.
This was the biggie in today’s announcement. Employees will see the amount of national insurance they pay drop by 2% from January 6, 2024.
It will mean you keep more of your income than you do at the moment, so your take home pay will go up.
If you’re on £20,000 you’ll keep almost £150 more of your salary next year while anyone earning £60,000 or more will keep £754 extra.
Big numbers, but remember that’s over the year.
But what Hunt failed to say was that income tax thresholds are still in the deep freeze until April 2028.
That’s a major stealth tax and the Office for Budget Responsibility (OBR) estimates it will mean that four million more of us will start to pay income tax at 20% by 2028. Three million workers will see their income tax rate tip over into 40%.
What does that mean in money? It means £43 billion.
UK taxpayers will pay £43 billion more income tax over the next four years than we would have if the thresholds had been put up in line with inflation.
Like the state pension, universal credit and other benefits have been.
Mr Hunt claimed the central part of the Conservatives’ plan for growth is to ‘make work pay’. But pay who?
The OBR also calculates that the national insurance cuts will cost the Treasury £180 million.
That means income taxpayers will pay £43 billion more income tax over the next four years because the thresholds remain frozen and won’t rise in line with inflation.
Cutting national insurance will give us £180 million back. That’s a 0.4% rebate on the extra we’ve paid in income tax since 2020.
And Laura Suter, head of personal finance at AJ Bell, makes a very good point: ‘Once again the government has changed the rates of National Insurance partway through the tax year.
‘It’s the fifth change to National Insurance rates or thresholds in less than two years – meaning it would be very easy for workers to lose track of what rate they are paying.’
Self-employed class 4 national insurance will be cut from 9% to 8% from 6 April 2024 and self-employed people with profits above £12,570 won’t have to pay class 2 national insurance.
It’s estimated that these changes could boost two million self-employed people’s pay packets from April next year.
Taken together, the Chancellor said the average self-employed person earning £28,200 a year would pay £350 less a year.
Again, this sounds good but remember that inflation is eating away at our real incomes and crucially, government left income tax thresholds on hold.
Another thing to watch out for. If you choose not to pay class 2 contributions, you won’t get the credit towards your state pension.
You could argue it’s a pretty small short-term gain which, unless you choose to keep paying these contributions, means you’re giving up a very valuable income when you retire.
Government honoured its triple lock pledge, meaning the full flat rate state pension will rise by 8.5% in April 2024 to £221.20 a week, worth up to £900 more a year.
Many older pensioners who retired before 2016 get less than the new state pension.
Their full weekly basic state pension will rise from £156.20 to £169.50 from April next year.
National insurance cuts won’t benefit pensioners.
Alice Guy, head of pensions and savings at Interactive Investor, said: ‘People over state pension age don’t pay national insurance on their income. Instead, they will still pay more income tax in 2024, as the personal allowance remains frozen at £12,570.’
The government has decided to increase Universal Credit and other benefits from next April by 6.7% in line with September’s inflation figure.
This means an average increase of £470 for 5.5 million households next year.
If you rent from the council, there was finally a bit of positive news.
Local housing allowance (LHA) rates, which govern the maximum amount of support for their rent that low-income private renters can get, have been frozen in cash terms since April 2020.
Rents for new lets have increased by more than a fifth on average over the same timeframe.
‘The result is that the proportion of new private rental properties on Zoopla affordable to housing benefit or universal credit recipients has plummeted from 23% to 5% since the freeze,’ the Institute for Fiscal Studies noted in June.
‘A tiny proportion compared with the 38% of private renters who receive housing benefit.’
After years of campaigning by the Institute for Fiscal Studies, Resolution Foundation, Citizens Advice UK and the Joseph Rowntree Foundation, government has relented.
Local Housing Allowance will rise from April next year, giving around 1.6 million households an average of £800 of support next year.
Inflation fell to 4.6% in October, a big drop from a year ago when it was 11.1%.
Much was made of this, with suggestions it would mean the Bank of England could start cutting interest rates next year.
The OBR poured cold water on that hope. In its economic and fiscal outlook published alongside the Autumn Statement, it said: “Inflation is expected to be more persistent and domestically fuelled than we previously thought, falling below 5% by the end of this year but not returning to its 2% target until the first half of 2025.’
That’s more than a year later than the OBR thought at its last forecast made in March.
‘Markets now expect interest rates will need to remain higher for longer to bring inflation under control,’ it said in today’s outlook.
Worryingly, food inflation is still stubbornly high. Figures from the Office of National Statistics showed food and non-alcoholic prices rose 10.1% over the year to October – more than double the headline rate.
Given that food costs make up a much larger proportion of household spending for lower income families and individuals the cost of living isn’t going to ease any for many across the UK.
The energy regulator is also due to announce the energy price cap on November 23.
Analysts at Cornwall Insight forecast the average household energy bill will rise from £1,923 a year today to £1,996 in January 2024.
Energy price rises will feed into inflation, and push up food and clothing prices further.
Then there is the cost of rent and mortgages. The average monthly rent outside of London is now £1,278 according to Rightmove – 10% higher than a year ago.
Mortgage rates have come down a little over the past few months after the Bank of England put rate hikes on hold at 5.25% in August following 14 consecutive rises since December 2021.
However, there are still over a million homeowners set to remortgage or slip onto their lender’s standard variable rate over the coming year.
Going from a fixed rate of around 2% onto a fix over 5% will add hundreds of pounds to monthly mortgage repayments overnight – and that’s an issue that remains regardless of today’s tax cuts.
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