As we fly towards a general election next year, the Chancellor Jeremy Hunt outlined his plans for the nation’s finances with a range of tax changes which will apply in the main from next April.
National Insurance changes
One of the largest changes which was announced was a change to National Insurance rates. These work in a similar way to income tax, by deducting a fixed percentage of money which you earn from your wages (when employed) or profits (when self employed). If you earn below £12,570 per year and under pension age, these generally don’t apply to you.
You can view a full guide to the different types of National Insurance on our knowledgebase – however one of the major changes was the removal of Class 2.
For employees, the current rate of National Insurance is 12% on earnings between £12,570 and £50,268 – with a further 2% on values above this.
However from January (not April!), the Chancellor has cut this from 12% to 10% – which was said to save those on £35,000 a year approximately £450.
However, the tax bands (where the £12,570 value comes from) is frozen until 2028 at the earliest, therefore you could me moved into a higher tax bracket, or through payrises, this may increase the amount of tax you pay.
When self employed, the rates are slightly different – this time it’s 9% which is charged on profits over £12,570 – this will reduce by 1%.
And Class 2 which is a flat rate of £3.45 per week will be abolished.
VAT remains unchanged.
Inflation still high
Something which the Prime Minister aimed to reduce was inflation which peaked at over 11% last October (let’s not forget the several changes to tax and budgets we had..) however the target of 2% is expected by the Office of Budget Responsibility to eventually be reached at some point in 2025.
But this means prices will still rise – but perhaps not as fast as they have done previously. The next main price change will be when Ofgem announces the new price caps for energy next week – where these are expected to increase.
Minimum wages to rise
From April, there’s a number of changes for National Living and Minimum Wages.
- The National Living Wage for over-23s rises from £10.42 an hour to £11.44 an hour
- Those aged 21 to 22 will be eligible for the National Living Wage for the first time (They will also receive £11.44 an hour, up from £10.18 an hour)
- The National Minimum Wage for 18 to 20-year-olds rises from £7.49 to £8.60 an hour
- The National Minimum Wage for under-18s will rise from £5.28 to £6.40 an hour
- The apprentice rate goes up from £5.28 to £6.40 an hour
However, all salaries are paid by companies – who may pass the price rises onto the consumer.
Benefits changes
A number of benefits which are received by millions of individuals are due to increase by inflation linked – therefore expected to rise by 6.7%
However, the Government is introducing a new role where claimants who fail to find work for more than 18 months will have to undertake work experience placements. And in some cases, those who refuse work – or engaging with Job Centre colleagues will lose benefits and need to reapply.
State pension increases
Despite wider costs – the Government has agreed to the triple-lock to continue as planned.
This means it will increase by 8.5% this year. From April 2024 this will increase by:
- £221.20 a week for the full, new flat-rate state pension (for those who reached state pension age after April 2016)
- £169.50 a week for the full, old basic state pension (for those who reached state pension age before April 2016)
And something to celebrate
Duty for beer, cider wine and spirits are frozen until next August.