The Chancellor announced in yesterday’s Autumn Statement the measures he will be bringing in to bridge the £60bn gap in the UK’s finances. The run up in the weeks before the announcement focused in on measures that would affect all UK tax payers and households, and was widely believed would involve a freeze of the tax allowances and a lowering of the upper rate tax threshold.
Here we summarise what the Chancellor, the Hon Jeremy Hunt, announced yesterday in Parliament and how it affects us:
- The Top rate tax threshold reduces from £150,000 to £125,140 creating nearly a quarter of a million more additional rate taxpayers.
- The other personal tax thresholds will remain at their current level until 2028. Although in low inflationary times this would have been warmly welcomed with increases in wages, and for contractors hourly rates, more will be taken in taxes.
- National Insurance thresholds will remain at their current thresholds for an additional two years to April 2028. This will, like the personal tax thresholds, mean more money is taken in taxes.
- Dividend and CGT allowances will be halved in 2023/24 and 2024/25
- The domestic energy price guarantee will continue but increase from £2,500 to £3,000 from April 2023 meaning less subsidy than originally promised in the mini budget.
- The investment zones announced by Kwasi Kwarteng in his mini budget have been scrapped.
The measures that were announced today are expected to shrink household incomes by 7% over two years, according to the OBR. The Budget is described as being the bleakest Tory budget for a generation leaving the optimism of the last chancellor’s mini budget a vague and distant memory.
The new budget highlights the fiscal drag phenomenon which means that UK tax payers will all pay more tax as inflation pushes more people into higher rate tax brackets.
The Chancellor announced that Public Spending will continue to increase in real terms every year for the next 5 years but at a slower rate and he is looking for government departments to make efficiencies to accommodate the diminishing budgets. The Treasury will increase the schools budget, with an extra £2.3bn a year. Touching on health the chancellor said social care did an incredible job during the pandemic but an ageing population is putting pressure on the service. He is allocating £1bn more next year and £1.7bn the year after to free up hospital beds. There will be a £3.3bn increase in NHS funding.
For contractors it is clear that with increases in mortgage rates for those owning their own homes, together with increased taxes and energy bills the months ahead will be tight. Clearly their only options is to negotiate contracts that are lucrative and make the most of their skillset and time. This is easier said than done when British business is also feeling the heat from the Autumn Statement and a continuing hard line on using limited company contractors.
Umbrella companies were, and continue to be, a good option for time-poor contractors – taking away a lot of the hassle and administration behind contracting. If you want to get the best deal on the market at the moment call us to discuss your options.
If you’re starting a new contract, ContractingWISE has access to a wide range of hassle-free services that can help you with finding the right umbrella company for you. To talk to a member of our team, call: 0203 642 8679