Economic Outlook
The Office for Budget Responsibility (OBR) predicts an average inflation rate of 2.8% by the end of next year and 2% by 2025.
The OBR sees overall UK growth in 2023 of 0.6%. Economic growth of 0.7% is expected in 2024, doubling to 1.4% in 2025.
Implications for Businesses
£500m will be invested over the next two years to fund further innovation centres to help make the UK an AI powerhouse.
The pre-announced £4.5 billion in funding for British manufacturing to boost investment in eight sectors across the U.K., available for a five-year period from 2025 was confirmed. This includes £960 million for clean energy, over £2 billion for the automotive industry, £975 million for aerospace and £520 million for life sciences manufacturing. The entire manufacturing sector makes up over 43% of all U.K. exports and employs around 2.6 million people.
A new and simplified tax relief for research and development will combine the existing R&D Expenditure Credit and SME schemes. Through that merged scheme, the rate at which loss-making companies are taxed will be reduced from 25% to 19%.
With regards to capital allowances, the full expensing scheme which was due to expire in 2026, will be made permanent. This allows firms to write off the entire cost of spending on new machinery and equipment, while also saving 25p from every pound spent on other types of investment.
The 75% discount on business rates – the tax paid on non-domestic properties – of up to £110,000 for firms in retail, hospitality and leisure will be extended for another year.
Incentives for investment zones and tax reliefs for freeports to be extended from 5 to 10 years. Three further investment zones to be established focused on advanced manufacturing in East Midlands, West Midlands and Greater Manchester. Second investment zone in Wales in Wrexham and Flintshire.
Implications for Employers, Employees and Self Employed
From 6 January 2024, Employee’s Class 1 NIC main rate cut from 12% to 10%; additionally, for the self-employed, from 6 April 2024 Class 2 NIC will be abolished and the Class 4 NIC rate will be cut from 9% to 8%.
National Minimum Wage/National Living Wage will increase from April 2024 to £11.44 for those aged 21 and over; similar increases will also be made for those aged 18-20 (£8.60) and 16-17 (£6.40).
Employees earning more than £12,570 a year currently pay 12% national insurance on pay up to £50,270. That will fall to 10%. The cut will be in effect from 6 January.
For the self-employed, the chancellor said he is making reforms to the way national insurance is paid to save around 2 million people an average of £350 per year.
He said he is abolishing Class 2 national insurance – which he says saves £192 a year – for the self-employed.
Meanwhile, Class 4 national insurance will be cut from 9% to 8% on earnings between £12,570 and £50,270.
State pension payments are to rise by 8.5%. That means, from April 2024, it will be worth:
- £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)
Work to establish a pension pot for life scheme will be begin, giving workers the option to nominate the fund their employer pays into, which can follow them as they move throughout their working life.
All alcohol duty will be frozen until August 2024. That means no increase in duty on beer, cider, wine or spirits.