March’s Spring Statement saw the Chancellor of the Exchequer, Rishi Sunak, announce some gloomy economic forecasts. This coincidentally happened on the same day inflation was reported to be rising at its highest rate in 30 years.
But was the forecast as dismal as it seemed?
In its economic forecasts, the OBR notes that “Given the evolving situation in Ukraine and the resulting global response, there is significant uncertainty around the outlook for global Gross Domestic Product (GDP)”. However, despite uncertainty, the OBR forecasts continued economic growth between now and 2026 of between 1.7% and 3.8% per annum. Predicted to be a temporary hike to inflation, with CPI dropping from 7.4% in 2022 to 4.0% next year. Predicted to settle at 2% in 2026.
These are only predictions, however, they offer little comfort to those feeling the squeeze already, with the National Insurance increases still to come.
Tax and National Insurance:
We also received further clarification on how the National Insurance increase will affect individuals. The starting point for individuals to pay NI contributions, is to be equalised with the income tax personal allowance from July 2022.
This will increase the NI Primary Threshold and Lower Profits Limit, for employees and the self-employed, from £9,880 to £12,570 in line with your personal allowance for income tax. There is no change to employer NI contributions.
It was also announced that the basic rate of income tax is to be cut from 20% to 19%, by the end of this Parliament (April 2024).
How can we help?
As Financial Planners we aim to offer the support needed to plan for your future. Feel free to contact us if you are left with any concerns or questions: https://herbertscott.co.uk/contact/
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