– A cut to national insurance (NI)
Millions of workers will benefit from a 2p cut in NI as Jeremy Hunt began to ease the tax burden ahead of the general election.
The Chancellor said the two percentage point reduction in the main rate will save someone earning £35,000 more than £450 and the change would benefit 27 million people.
Employees under pension age who earn less than £12,570 a year pay no NI, and neither do people over the state pension age, even if they are still working.
For employees on between £12,570 and £50,268, the current NI rate is 12% on earnings and 2% on earnings above that.
This initial contribution will be cut from 12% to 10% from 6 January.
But it comes after Mr Hunt has frozen thresholds for income tax, meaning that “fiscal drag” has meant that as people’s earnings have increased they have either been brought into tax for the first time or moved into higher bands.
– Price rises are forecast to slow
Consumers have struggled through the cost-of-living crisis for almost two years now as prices have soared, particularly on energy and food.
Mr Hunt told Parliament that inflation – which dropped to 4.6% in October – is set to fall to 2.8% by the end of 2024, before hitting the Bank of England’s 2% target in 2025.
This indicates higher inflation than previously projected by the Office for Budget Responsibility (OBR) in the spring, after it guided towards an inflation rate of 0.9% for 2024.
Nevertheless, higher inflation is expected to provide a boost to the Chancellor by bringing in larger tax receipts.
The OBR also forecast that living standards will weaken, with real household disposable incomes set be 3.5% lower in 2024/25 than they were before the pandemic due to pressure from inflation and high mortgage rates.
Minimum wage to rise in April
Those on the lowest incomes will receive a pay rise in April, with 21 and 22-year-olds getting the biggest increase.
The national living wage will rise to £11.44 in April next year, the Treasury has announced.
The rate is currently £10.42 for workers aged over 23, but the new figure will apply to 21 and 22-year-olds for the first time.
The national minimum wage for 18 to 20-year-olds will also increase by £1.11 to £8.60 per hour, the Government has said.
Apprentices will have their minimum hourly rates boosted, with an 18-year-old in an industry such as construction seeing their minimum hourly pay rise by more than 20%, going from £5.28 to £6.40 an hour.
– Confirmation of 6.7% rise in benefits
Benefits will be raised in line with inflation, Jeremy Hunt has confirmed, as he pledged the Government will “continue to support families in difficulty”.
The Chancellor allayed charities’ fears that uprating would be done by the lower October inflation figure, as he acknowledged continued cost-of-living pressures which he said “remain at their most acute for the poorest families”.
Mr Hunt said the rise would amount to an average increase of £470 for 5.5 million households when it takes effect in April 2024.
– Tighter welfare rules take effect
Welfare recipients who do not get a job within 18 months will be forced to take on work experience under plans to get more people into employment, the Government had already announced.
Those who do not comply will have their benefits, including access to free prescriptions and legal aid, cut off.
– State pension going up
Pensions will be increased by 8.5% in line with average earnings to £221 a week from April, maintaining the so-called “triple-lock” policy whereby the amount paid is whichever is highest out of average earnings growth, Consumer Prices Index (CPI) inflation or 2.5%.
Savers could be given the right to pick the pension scheme their employer pays into, similar to the approach taken by countries such as Australia, under proposals being put out to consultation.
– Tobacco duty going up, alcohol duty frozen
Duty on hand-rolling tobacco will rise by an additional 10% but duty on beer, cider, wine and spirits will frozen until August next year.
– Nothing announced on help with energy or other cost-of-living payments
The Chancellor has not announced any additional help with energy bills or the cost of living.
There is another payment for pensioners this winter, and one for low-income people on benefits in the spring.
