Thousands of households across the UK are set to be around £3,850 better off as a raft of economic policies come into force.
- More money in people's pockets as a result of economic measures coming into effect today
- Raft of economic policies are set to boost UK households and reward work
- Low pay eliminated with largest ever cash increase to National Living Wage
An increase in the National Living Wage and a drop in energy prices mean certain households will stand to get this extra cash in their pockets.
The National Living Wage has officially risen from £10.42 an hour to £11.44, meaning no full-time worker over 21 will earn less than two-thirds of the average hourly wage. This marks a £1,800 annual boost to their pay packet - delivering a manifesto commitment to eliminate low pay.
Households will also save around £250 a year on average thanks to a drop in energy bills introduced by Ofgem today. This marks a 12.3% fall from the previous quarter, which brings prices down to their lowest since Russia's invasion of the Ukraine in February 2022.
The Prime Minister, Rishi Sunak, said:
Today's measures could save households around £3,850 year on average which - taken with the upcoming cuts to NICs - will put more money in their pockets to help ignite the economy.
Although recent years have tested our resolve, we have not bowed. We have stuck to the plan, more than halved inflation, and set us on a path to growth.
Because of this determination, we find ourselves in a new economic moment and - thanks to our bumper package of economic reforms coming into force today - 2024 is set to be the year Britain bounces back.
An increase to the Local Housing Allowance, also introduced today, means some of the poorest families on either Universal Credit or Housing Benefit will gain around £800 a year on average.
That runs alongside the roll out of 15 hours of free childcare, which will save working parents an average of £3,450 a year - the first stage in the £8 billion childcare package that was announced by the Chancellor last year.
Meanwhile, tax cuts to SMEs and the UK film industry will start benefitting firms up and down the UK to help drive growth in the economy.
This includes increasing the VAT threshold for small businesses, slashing business rates for high street businesses, funding apprenticeships, and igniting the British film industry with a 10 year tax relief.
This bumper package of measures are coming into force today will fire up businesses and push the UK further into this new economic moment which sees Britain bouncing back.
The last few years have not been easy for the UK economy - the legacy of Covid, and global instability have tested financial systems across the world.
Since the beginning of 2023, the Prime Minister has been working on five priorities - three of which were economic: to halve inflation, grow the economy and reduce debt. This has been achieved - and given us the headroom to deliver today's package and slash the average workers taxes by £900 a year.
This puts the UK in a strong position to achieve the long-term ambition to abolish NICs entirely. This will put an end to the unfair system which means workers are taxed twice for the same work - NICs and Income Tax.
Chancellor of the Exchequer Jeremy Hunt said:
Today we are addressing low hourly pay, with increases for people earning the National Living Wage worth £1,800 to a full time worker.
It's part of our plan to reward work which is why we're also cutting National Insurance and delivering on our promise of more free childcare. All paid for by our progress in getting the economy back on track.
Baroness Philippa Stroud, LPC Chair, said:
Today's increases in the NMW and NLW mark a really significant milestone for the UK's labour market. The Government set an ambitious, long-term target for the NLW which is being delivered. Today's increases for young workers also reflect our ambition not to leave these groups behind.
The target has boosted the incomes of low-paid workers in especially turbulent times and the evidence suggests the increases to date have been implemented steadily and carefully so as not to damage employment opportunities.
Our work at the LPC to monitor the impacts of these increases is more important than ever. We invite contributions from workers, employers and other organisations to our imminent consultation.
The measures coming into effect today include:
National Living Wage increase
National Living Wage will increase from £10.42 an hour to £11.44 - representing a £1,800 boost to their yearly pay cheque.
This means nobody over 21 will earn less than two-thirds of the average hourly wage increase - putting more money in the pockets of around 3 million of UK's lowest paid workers.
A full-time worker on the National Living Wage will see their gross annual earnings increase by over £8,600 since it was announced in 2015, and by over £10,000 since 2010.
Since its introduction, the National Living Wage has boosted the pay of millions of low-paid workers without any significant effects on employment.
SME VAT rate boost
The VAT threshold is being raised from £85,000 to £90,000. This means 28,000 fewer small businesses will be paying VAT at all from today.
The UK has a higher threshold than all EU countries, giving UK small businesses more cash to scale and grow their companies.
Apprenticeships fully funded by Government
The Government will fully fund apprenticeships for young people in small businesses from today by paying the full cost of training for anyone up to age 21.
This is backed by £60 million of funding and will support up to 20,000 new apprenticeships.
Business rate cuts for high street businesses
Retail, hospitality and leisure businesses will continue to benefit from 75% off their business rates relief for yet another year.
This protects 230,000 high street properties from rising costs and saves the average pub nearly £13,000 over the next tax year.
The small business multiplier for business rates will be frozen for a fourth consecutive year, protecting over one million ratepayers from a 6.6% increase in bills.
Tax relief for UK film industry
Film studios across England will receive 40% business rates relief on gross business rates bills until 2034.
This £470 million tax cut will ensure the UK remains an attractive place for its £11.9 billion film and high-end TV sector.
This is alongside the transformational UK Independent Film Tax Credit (IFTC), designed to boost the production of UK independent films and support UK talent in films.
Under the IFTC, eligible films will be able to claim an enhanced credit, at a rate of 53%, on their qualifying expenditure.
Local Housing Allowance boosted
Depending on the benefit you receive and your payment schedule, eligible claimants will start to see an increase in their Local Housing Allowance rates.
The boost will benefit some of the poorest families on either Universal Credit or Housing Benefit who will gain around £800 a year on average.
This puts more money in the pockets of the lowest earners - giving them more spending power to boost their local economy.
New Energy Price Cap begins
Energy bills will fall by around £238, saving millions of households around £20 a month.
Energy prices are now at their lowest level in two years/since Putin's illegal invasion of Ukraine, putting more money back into the pockets of hardworking families.
Households will now also benefit from £30 compensation if switching their supplier takes more than 5 working days, thanks to changes from Ofgem coming into force.
The move will give families reassurance that switching to cheaper deals can be quick and easy, as competition starts to return to the market.
Household Support Fund extended by six months
The six-month extension to the Household Support Fund starts today - backed by £500 million (£421 million to LAs in England and £79 million to DAs via Barnett.
This boost to the Household Support Fund will give vital, targeted support to millions of vulnerable households across England.
The fund has previously been used to help with water bills, provide health visits, disabled children services, free school meals and more.
Since launching in October 2021 over £2.5 billion has been invested into the Household Support Fund.
Since October 2022, CPI has already more than halved from 11.1% to 3.4%. This is stabilising the financial situation for many families, and the OBR expects that by Quarter 4 2024 (October-December) CPI will have fallen to 1.4%.
Childcare rolled out for working parents of 2 year olds
15 hours free childcare has been rolled out to parents of 2 year olds, which will save working parents an average of £3,450 a year.
This is the first stage in the £8 billion childcare package that was announced by the Chancellor last year - the biggest expansion of Government childcare provision in history.