This Chancellor presented a programme of tax cuts in his Autumn Statement, yet the tax burden continues to increase.

The verdict from the Office for Budget Responsibility (OBR), whose job it is to analyse the financial impact of the Autumn Statement, found:

“... while personal and business tax cuts reduce the tax burden by half a percentage point, it still rises in each of the next five years to a post-war high of 38 per cent of GDP.”

While Mr Hunt made some significant tax cuts, they are outweighed by earlier tax increases over the last few years.

National insurance changes

The most eye-catching announcements were cuts made to national insurance contributions (NICs):

• If you are an employee under State pension age (currently 66), then from 6 January 2024 the main class 1 contribution rate on earnings between £12,570 and £50,270 will be reduced from 12% to 10%. Earnings above £50,270 will remain subject to the current 2% rate.
• If you are self-employed and under State pension age from 6 April 2024:
• Flat rate class 2 NICs (currently £3.45 a week) will no longer be required. However, if your annual profits are below £6,725 you can continue to make voluntary class 2 contributions to secure contributory benefits, such as the State pension.
• The class 4 contribution rate on profits between £12,570 and £50,270 will be reduced from 9% to 8%. For profits above £50,270 the existing 2% rate remains unchanged.

These changes are worth up to £556 a year if you are self-employed and £754 a year if you are an employee. Their total cost to the Exchequer is about £10 billion a year by 2028/29. However, the freezes to income tax and NIC allowances and thresholds since 2021/22, and this year’s lowered additional (top) rate threshold, mean the Treasury will be gaining £27 billion in 2024/25. For companies the major news was that the 100% capital allowance for most investments in new plant and machinery, which was due to disappear after March 2026, will be made permanent, at an initial annual cost of around £10.7 billion.

Wave of change?

As with any ‘fiscal event’, there was a raft of other changes, proposals and consultations in the forest of documentation from HMRC and the Treasury – 110 proposals in all. These include:

• Long overdue simplification of the ISA rules from 6 April 2024.
• A change to the rules on off-payroll working (IR35) that will avoid the double taxation that can currently arise.
• A collection of papers on various aspects of pensions, the most noteworthy of which was probably a first step towards allowing individuals to have a single pension pot which moves with them from employer to employer.
• More changes to Making Tax Digital (MTD), aimed at simplifying the procedures of this much-delayed reform.
• A 9.8% increase in the National Living Wage to £11.44 an hour from April 2024.

For more information on the changes mentioned above or any other aspects of the Autumn Statement, please contact us.