Last week the Chancellor presented his Annual Statement. He had a difficult act of trying to keep control of inflation and delivering some tax cuts. The improvement in public finances enabled him to cut national insurance contributions and to uprate working age benefits by inflation (6.7%), and increase the state pension, via the Triple Lock, by 8.5%.

He announced changes for individuals and these included:

Pensions

The new State Pension will increase by 8.5% from April 2024, to £221.20 a week.

The government will consult on giving pension savers the option of having a workplace ‘pension for life’ where employers would be required to pay contributions into a pension of the employee’s choosing.

The government will publish legislation in the Finance Bill with the lifetime allowance still set to be abolished from 6 April 2024.

National Insurance Contributions (NICs)

Employee NICs will be reduced from 12% to 10% on earnings between £12,570 and £50,270 from 6 January 2024, saving someone on an average salary of £35,000 over £450 each year.

For the self-employed, from 6 April 2024 Class 2 NICs will be abolished and Class 4 NICs will be reduced from 9% to 8% on earnings between £12,570 and £50,270.

For Income Tax* the tax-free personal allowance remains at £12,570 and the higher rate tax threshold is £50,270. These thresholds have been frozen until 2028.

*Applies for England, Wales and Northern Ireland. Thresholds differ for Scotland.

Inheritance Tax

Despite press speculation, the Inheritance Tax Nil Rate Band and additional Residence Nil Rate Band remain frozen at £325,000 and £175,000 respectively until 6 April 2028.

Dividend Tax allowance

This is being reduced from £1,000 per year to £500 per year from 6 April 2024.

Capital Gains Tax

The annual Capital Gains Tax exemption will reduce from £6,000 to £3,000 from 6 April 2024.

Businesses

Capital allowances:
UK businesses will be able to write off (‘fully expense’) the full cost of qualifying plant and machinery in the year of investment. This means businesses are rewarded with up to 25p off their tax bill for every £1 that they invest, which amounts to a tax cut of over £10 billion per year.

Business rates:
The government is announcing a business rates support package worth £4.3 billion over the next five years to support small businesses and the high street.

The small business multiplier will be frozen for a fourth consecutive year and Retail, Hospitality and Leisure (RHL) relief will be extended, ensuring the most vulnerable businesses continue to be supported.

National Living Wage:
The National Living Wage will rise from £10.42 to £11.44 per hour from April 2024, worth up to £1,800 for a full-time worker. The age threshold has been reduced from age 23 to age 21.

Innovative investments:
The government has announced further targeted support for digital technology, green industries, life sciences, advanced manufacturing and creative industries. This includes making available £4.5 billion to unlock investment in automotive, aerospace, artificial intelligence and clean energy sectors.

To discuss anything about these changes, or if you have any concerns, please feel free to contact your usual Dentons Wealth Independent Financial Adviser.

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