Autumn Budget: how this affects UK businesses
The chancellor, Jeremy Hunt announced the Autumn budget on 22nd November where he discussed a range of measures the Government are putting in place to rebuild the economy and to drastically reduce inflation. Most significant measures included a rise to the national living wage, reductions to national insurance contributions, £50m investment in apprenticeships, and pension updates.
Many businesses have approached us to get some information on how this will affect their business. Here are the main updates the Chancellor discussed yesterday.
National Living Wage Increase
The national living wage for employees aged 21 and over will increase from £10.42 to £11.44 from April 2024. This is a 9.8% increase and the biggest rise to the national living wage in more than a decade. The age that workers were eligible to receive this wage was 23 the previous year. However, the Government has decided to reduce this to 21 year-olds for the first time. This will mean 23 year olds working full-time and earning minimum wage will receive around a £1,800 a year increase on their wage. 21 and 22 year-olds will receive around a £2,300 annual rise when working full time.
The rates for 18 to 20 year olds will increase by £1.11 an hour to £8.60. Apprenticeship wages will also increase from £5.28 to £6.40 an hour.
This is great news for employees. However, we understand that a lot of businesses are feeling the strain of the cost of living crisis and may struggle to meet this by April.
If you’re able to increase staff wages before April 2023, this could send a positive message to your employees. However, we know this isn’t possible for lots of businesses and many are looking to establish what other changes need to happen to offset this increase.
The real living wage recently announced their suggested increase in hourly pay. You can read more about this in our recent article.
As part of the Autumn budget, Jeremy hunt stated that the government will commit to triple-locking pensions. The state pension will also increase to 8.5% in April 2024 which is the second biggest increase ever.
The chancellor has also committed to start consulting on more pension reforms. This includes a proposal to offer ‘one pension pot for life’ which will give pension savers the right that their employers pay pension contributions in to their existing pot.
National Insurance Reduction
From 6th January 2024, national insurance will see a cut from 12 per cent to 10 per cent. Currently, employees earning between £12,571 and £50,271 are charged 12% and 2% on anything above that.
The chancellor also announced that the Government will invest £50m over the next two years to increase the levels of apprenticeships in engineering and “other key growth areas”.
Benefits for Jobseekers Update
Hunt announced the government’s Back to Work Plan. This plan will focus on helping people with long-term sickness and disabilities back into work. As part of this, the Government has suggested updates to fit notes. This is in an attempt to encourage support and make reasonable adjustments instead of ”only” recommend time off. The chancellor also suggested the plan will focus on work capability assessments and help people with health conditions find opportunities in the workplace.
Business Rate Relief
The Government has taken the decision to extend the 75% discount on business rates up to £110,000 for hospitality, retail, and leisure organisations for a further year. The small business multiplier will also freeze for another year.
The day after the Autumn Budget announcement, the Government has shared updates to energy bills and the price cap. Regular household energy bills are planned to be capped at an average of £1,928 a year for typical gas and electricity bills from January 2024 to March 2024. This is a 5% increase compared to the current capped rate.
Overall, it looks like the decisions the Chancellor has made will help employees in some areas. However, there seems to be a lack of support for businesses and SMEs may struggle to meet the demands of the changes. If you would like more advice on the Autumn budget or support with your HR function, contact us.