Weve reached the end of the year! We hope you had a wonderful Christmas.
There have been several developments during the past couple of months that may be important to consider as we head into 2024.
Here are the latest updates from the world of business and tax.
Inflation Falls
UK inflation fell to 3.9%, its lowest rate in two years.
The Office for National Statistics attributed the reduction partly to falling petrol prices. Although inflation remained almost double the Bank of Englands 2% target, the reduction meant that fuel costs, in particular, had started to ease.
However, with energy bills remaining high, financial pressures were not expected to reduce significantly for families struggling at this time of year.
Recession Potentially on the Horizon
Gross domestic product fell by 0.3% during October, although the economy was initially expected to stabilise.
Chancellor Jeremy Hunt said it was inevitable that GDP will be subdued while interest rates remained high to tackle inflation.
Revised figures also showed that the UK economy contracted by 0.1% between July and September.
There was no economic growth between April and June, despite earlier reports suggesting that the economy had grown by 0.2%.
If figures published in the New Year showed that the economy had also contracted during the final quarter of 2023, the UK would enter a technical recession.
Government Borrowing Higher Than Expected
Despite decreasing during November, government borrowing remained high.
Monthly borrowing stood at £14.3 billion, exceeding the £13 billion forecast. Borrowing during the financial year had reached £116.4 billion£24.4 billion more than during the same period of the previous year.
The Office for National Statistics explained: Payments relating to the energy price schemes that began in October 2022 have now stopped. However, these reductions in spending were offset by other inflation-related costs, such as increased benefit payments.
New Income Tax Band Introduced in Scotland
The Scottish Government announced tax changes affecting some of Scotlands highest earners during the 2024/25 tax year.
The key changes included:
- The thresholds for the Basic Rate of 20% and Intermediate Rate of 21% would increase, allowing people to earn more before paying these rates.
- The Starter Rate and Basic Rate bands would expand, meaning a larger proportion of earnings would be taxed at the lower rates of 19% and 20%.
- A new Advanced Rate of 45% would apply to earnings between £75,001 and £125,140.
- The Top Rate would increase by one percentage point, from 47% to 48%.
Bank of England Holds Interest Rates
The Bank of England held the base interest rate at 5.25% for the third consecutive meeting.
Higher interest rates made borrowing more expensive for households and businesses.
The Bank had increased its base rate 14 times since December 2021 in an effort to bring inflation closer to its 2% target.
Final Cost-of-Living Payment Due in February
The government announced that the third and final cost-of-living payment would be issued during February 2024.
Approximately eight million eligible households receiving certain means-tested benefits or tax credits would receive a final payment of £299.
The cost-of-living payment scheme began in spring 2023 to provide additional financial support to eligible households.
Looking Ahead
That is all the news from December. Have a great New Year, and remember to look out for further business and tax announcements during January.