The UK Autumn Budget 2023, delivered by the Chancellor of the Exchequer on 22 November 2023, addresses the challenges posed by the global pandemic, inflation, and geopolitical shifts. The budget aimed to balance immediate economic pressures with long-term growth strategies.
In this article, we examine the announced specific measures and recognise their potential impact from various perspectives.
- National Insurance Cuts: Class 1 employee NI contributions will be reduced from 12% to 10%, effective from January 2024. For self-employed individuals, Class 4 NI will drop from 9% to 8%, with Class 2 NI abolished from April 2024. These reductions aim to increase disposable income and boost consumer spending, though concerns about their impact on public service funding persist.
- Alcohol Duty Freeze: Duty on all alcohol types has been frozen until August 2024. This measure is intended to provide relief to consumers and the hospitality sector, but also raises health and social responsibility considerations.
- Sanitary Product Tax Relief: The zero-rating on sanitary products will be extended to include period underwear from January 2024, reflecting a commitment to making essential personal care more affordable.
- ISA Allowances and Inheritance Tax: The budget maintains current ISA allowances and inheritance tax rates from 2023/4, suggesting continuity in wealth management policies despite earlier speculations of change.
For Businesses and Companies
- Full Expensing for Capital Allowances: Businesses can now claim a 100% deduction for the cost of qualifying plant and machinery in the first year, a measure now permanent. This policy is seen as a significant step towards promoting capital investment, though its long-term economic impact remains a topic for debate.
- R&D Tax Credit System Overhaul: From April 2024, the R&D tax credit schemes will be merged, aligning with the current Research and Development (R&D) expenditure credit (RDEC) rate of 20%. This overhaul aims to simplify innovation incentives, but its effectiveness in fostering widespread technological advancement is yet to be determined.
- Corporation Tax and Cash Basis Accounting: While general corporate tax rates remain unchanged, Annual Tax on Enveloped Dwellings (ATED) will increase by 6.7% from April 2024. This decision reflects a nuanced approach to taxation, balancing business support with fiscal sustainability.
Additional Key Measures
- Childcare Support and Pensions: The introduction of 30 hours of free childcare in England, phased from April 2024 to September 2025, alongside an 8.5% increase in the basic state pension to £221.20 a week from April 2024, aims to support families and the elderly. The broader economic effects of these measures, particularly on inflation and public spending, will be crucial to observe.
- Energy and Housing Initiatives: The continuation of the energy price guarantee until 30 June 2023, along with additional funding for regional development, underscores a commitment to managing living costs. The long-term implications for energy policy and housing affordability remain open for discussion.
- Tobacco Taxation: The budget introduces above-inflation tax increases on tobacco, particularly hand-rolled tobacco, in line with public health objectives. The impact of these increases on consumer behaviour and the tobacco market will be interesting to monitor.
The Autumn Budget 2023 offers a strategic mix of policies aimed at navigating current economic challenges and fostering a resilient future for the UK. Its success and impact, influenced by the global economic landscape, will be important to observe. While the budget introduces measures anticipated to address key economic and social issues, their wider implications on inflation, living costs, and economic stability will require ongoing scrutiny.
If you have any questions about the outcomes of the budget, please contact us. We’re here to explore how the Autumn Budget 2023 announcements may be important for your specific circumstances.
THE VALUE OF INVESTMENTS AND ANY INCOME FROM THEM CAN FALL AS WELL AS RISE, AND YOU MAY NOT GET BACK THE ORIGINAL AMOUNT INVESTED.
PAST PERFORMANCE IS NOT A GUIDE TO FUTURE PERFORMANCE AND SHOULD NOT BE RELIED UPON.
HM REVENUE AND CUSTOMS PRACTISE, AND THE LAW RELATING TO TAXATION ARE COMPLEX AND SUBJECT TO INDIVIDUAL CIRCUMSTANCES AND CHANGES WHICH CANNOT BE FORESEEN.
AN ISA IS A MEDIUM TO LONG TERM INVESTMENT, WHICH AIMS TO INCREASE THE VALUE OF THE MONEY YOU INVEST FOR GROWTH OR INCOME OR BOTH. THE VALUE OF YOUR INVESTMENTS AND ANY INCOME FROM THEM CAN FALL AS WELL AS RISE. YOU MAY NOT GET BACK THE AMOUNT YOU INVESTED.