Jeremy Hunt, the Chancellor of the Exchequer, is expected to cut National Insurance for both employees and the self-employed when he announces his Autumn Statement at lunchtime today.
In a further teaser, he has also announced that the Living Wage will increase to £11.44 per hour from April, which is an increase of just under £1 per hour. This means that the lowest-paid workers will effectively have their wages increased by around 10% next year.
This translates to an increase of more than £1,800 per year for a full-time worker.
Ministers say this is the third-largest increase in real terms since the Living Wage was introduced in 2016.
Whilst the Living Wage is good news for employees, we in the insolvency sector know that it can make things harder for employers who are forced to pay it. As some sort of trade-off, he is going to make permanent a £10bn-a-year tax break for companies that invest in equipment and technology, which he claims will be the biggest tax cut for businesses in modern British history.
We in the NTI News Room are not sure how much businesses such as a hairdressing salon, who would likely be paying many of its employees the increased Living Wage, would be able to enjoy such a “tax break”.
You will have seen the headline this week that Rishi Sunak has said that those who are on benefits and can work should do so, or face their benefits being cut. It is said that Mr Hunt will today confirm significant increases in benefits and the state pension, on the other hand. Hunt has allegedly decided to put cuts to National Insurance at the heart of his Statement because they affect people who are in work. Plans to reduce income tax were considered but are more likely to be unveiled in the Spring Budget.
At present employees earning more than £12,570 a year pay 12 per cent National Insurance on their earnings up to £50,200, while self-employed workers pay 9 per cent. A 1 per cent cut would reportedly cost the Treasury about £5 billion. The Resolution Foundation has said that most people would still end up paying more National Insurance overall because of the ‘stealth tax’ impact of the decision to freeze the threshold at which people pay it.
In inflation news, Andrew Bailey, the Governor of the Bank of England, has said that expectations of interest rate cuts in mid-2024 put “too much weight” on recent falls in inflation, and has said that those setting interest rates “remain concerned” about the potential for persistent inflation.