22/11/2023

Chancellor Announces 'Biggest Tax Cut On Work Since The 1980s'

Chancellor Jeremy Hunt has announced "the biggest tax cut on work since the 1980s" in his 'Autumn Statement for Growth' today, Wednesday 22 November.

Aimed at building a stronger and more resilient economy, the Chancellor set out a plan to unlock growth and productivity by boosting business investment by £20 billion a year, getting more people into work, and cutting tax for 29 million workers.

The government has said that with higher revenues resulting from stronger growth than previously projected and the halving of inflation taxes can now be cut in a "serious, responsible way".

In his Autumn Statement, Mr Hunt announced that a 2 percentage point cut to Employee National Insurance from 12% to 10% will come into effect from January 2024.

For the average worker earning £35,400 a year, that amounts to an over £450 annual tax cut - almost immediately improving living standards for millions of people and rewarding hard-work as the government builds an economy for the future.

Taxes for the self-employed will also be cut and reformed. From April 2024, Class 4 NICs for the self-employed will be reduced from 9% to 8% and no self-employed person will have to pay Class 2 NICs, saving the average self-employed person on £28,200 a year £350 in 2024/25.

Taken together, this is a tax cut of over £9 billion per year and represents the largest ever cut to employee and self-employed National Insurance. The independent Office for Budget Responsibility (OBR) says these reductions will lead to an additional 28,000 people entering work.

The government has claimed that cutting National Insurance will not lead to any change in NHS funding or pension payments.

As signalled at Spring Budget, the Chancellor announced permanent Full Expensing: Invest for Less for those investing in IT equipment, plant, and machinery.

Full Expensing: Invest for Less is an effective permanent tax cut of £11 billion a year, boosting business investment by £14 billion across the forecast period and helping to grow the economy. With the tax cut now permanent, the UK will continue to have both the lowest headline corporation tax rate in the G7 and the most generous capital allowances in the OECD group of major advanced economies, such as the United States, Japan, South Korea and Germany.  Since the introduction of the super deduction – the predecessor to full expensing – in 2021, investment in the UK has grown the fastest in the G7.

To further ensure that work pays, Mr Hunt confirmed that the National Living Wage will increase by nearly 10% to £11.44 an hour from April 2024, the largest ever cash increase. The Chancellor also reinforced the new £2.5 billion Back to Work Plan for those with long-term health conditions, disabilities and difficulties finding employment, which includes tough new sanctions for those who can work but choose not to.

The Chancellor also announced that the government will honour its commitment to the triple lock in full, with the state pension to increase by 8.5% in April in what is the second biggest ever cash increase. Universal Credit and other working age benefits will also be boosted by 6.7% in April, in line with September's inflation figure as is convention.

Further action to help families includes increasing the Local Housing Allowance rate to cover the lowest 30% of rents from April – benefiting 1.6 million households with an average gain of £800 in 2024/25 - and an alcohol duty freeze to 1st August 2024, following common-sense changes of the duty system made possible by Brexit. Measures today take the government's total support for the cost-of-living between 2022-25 beyond the £100 billion mark, to an average of £3,700 per household.

Accompanying forecasts by the OBR confirm that today's measures will make the economy permanently bigger, with growth every year of the forecast period. Borrowing and debt as a share of the economy are lower than in Spring this year and next year, with borrowing also lower on average across the forecast by comparison. They also confirm that inflation is expected to return to target in line with the Prime Minister's economic priorities.

The breakdown of tax cuts included in the Autumn Statement can be read in full on gov.uk.




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