Staying up-to-date with changes in fiscal policies and regulations is crucial to the work of an accountant. The Autumn Statement is one such event that usually has a significant impact on our profession, and this year's statement was no exception ...
The sudden shift in fiscal policies and the looming general election are the two main factors driving the changes in National Insurance rates announced in the Autumn Statement. The improved fiscal position, driven by inflation, has allowed the government to finance tax cuts, including a two-percentage-point reduction in the main National Insurance rate!
However, these tax cuts pale in comparison to the increased revenue from the continued freeze to income tax thresholds. This freeze is estimated to raise £12 billion in this tax year and a whopping £44 billion by 2028-29.
The looming general election has also played a significant role in these changes. With the election on the horizon, the Treasury has maintained a variety of fictions, such as tolerating a £19 billion cut in departmental spending and raising £6.2 billion through the fuel duty freeze.
These fiscal holes will have to be filled by the new government, leaving the future of these policies uncertain. As we saw with last year's Lifetime Allowance abolition, the medium-term future of many of the policies announced in the Autumn Statement is up for debate.
These include making 'full expensing' permanent to encourage capital expenditure by UK companies, but others have raised concerns. The plan for small pension pots, for instance, has put the wind up insurers and other workplace pension providers because allowing employees to consolidate their small pension pots may lead to a shift in the pension market and disrupt the current dominance of insurers.
Another significant announcement from the Autumn Statement was the commitment to planning reform, which is promising, but has a history of not surviving contact with reality. However, the government's awareness of the delays in connecting to the national grid and the funding allocated to address these bottlenecks is a welcome move. This issue really has been holding back growth.
So, from my perspective at least, it is crucial to understand the implications of the National Insurance changes from the Autumn Statement. The sudden shift in fiscal policies and the looming general election bring about uncertainties that I need to navigate on behalf of my clients.
I feel that the National Insurance changes announced in the Autumn Statement have been driven by a better-than-expected fiscal position and the looming general election. However, these changes have raised concerns and uncertainties for businesses across the UK.
I'll make sure to update you as I learn more.
If you feel inspired to find out more about anything I've said here, do call me on 01908 774320 or leave a comment below and I'll be in touch as soon as I can.