Chancellor Jeremy Hunt delivered the 2023 autumn statement today.
From National Insurance (NI) cuts and a triple-lock State Pension guarantee for April 2024 to a possible new ‘lifetime pension’, Hunt laid out his plan to help ease the cost-of-living squeeze, reduce government debt and ‘turbo-charge’ UK economic growth.
Here are some of the main takeaways from the autumn statement and what it could mean for you and your money.
Key takeaways:
- A 2% cut to Class 1 National Insurance will be introduced from 6 January 2024
- State Pension triple-lock guarantee of 8.5% for April 2024
- A lifetime pension consultation to give us a new ‘pension pot for life’
- Self-employed NI cuts with around two million people expected to save on average £350 a year
- NatWest retail share offer proposed to come in the next 12 months
This article isn’t personal advice. Investments can fall as well as rise in value, so you could get back less than you invest. If you’re unsure what’s right for your circumstances, ask for financial advice.
Pension, ISA and tax rules can change, and benefits depend on individual circumstances.
How has the market reacted?
Susannah Streeter, Head of Money and Markets
Given the latest forecasts from the Office for Budget Responsibility (OBR), Houdini Hunt might be able to boast that the UK has narrowly escaped recession. However, the economy faces deteriorating growth prospects.
The difficulties facing the UK have overshadowed the Chancellor’s giveaways. The FTSE 100 staying in negative territory, and the more domestically focussed FTSE 250 not nudging much. The pound has hardly moved, still hovering around $1.25.
News that inflation is now projected to fall to 2.8% by the end of 2024 will also provide much needed relief for businesses and consumers sideswiped by high borrowing and soaring input costs. But there’s still an uphill struggle ahead in terms of growth.
The economy will still struggle to bust out of the clutches of stagflation, especially with the UK lagging behind in the global business investment league.
Jeremy Hunt did brandish more tricks from up his sleeve including planning pensions reform to unlock development and flows into British business. Making full expensing permanent is the move companies were holding out for, and finally they receive the relief they were seeking.
This allows companies to set 100% of their qualifying capital expenditure off against tax immediately. It will not only help with company cash flow, but also enable businesses to make commitments stretching far further into the future.
While this change will certainly reassure businesses, investors are still holding their breath for a bolder, bigger plan to super-charge growth.
National Insurance (NI) tax cuts – what they mean for you
Sarah Coles, Head of Personal Finance
A 2% cut to the Class 1 NI rate will be introduced from 6 January 2024.
It will apply between the primary threshold and the upper-earnings limit – saving employees who pay higher-rate tax £754 a year.
This will be the third change in less than two years – after the hike in April 2022 and the reversal in November of the same year.
For those struggling under a massive tax burden, this will bring real relief. A 2% cut isn’t to be sniffed at and it will make a big difference to the money in people’s pockets.
It will cut nearly £149 off the tax bill of an employee earning £20,000, £349 for an employee making £30,000, £549 for an employee making £40,000, £749 for an employee making £50,000 and £754 for any employees earning over the higher rate tax threshold.
The Chancellor will be hoping this is enough to help people, without further fuelling inflation. Because while people who are struggling to make ends meet are crying out for some relief from tax, it could do more harm than good if it keeps interest rates higher for longer – so that what we gain from tax cuts, we lose in higher mortgage payments.
By focusing on NI, it also limits the income boost to workers under State Pension age, so there would be no tax cut for pensioners.
These tax tweaks are in addition to cuts to NI for self-employed people where Class 2 NI will be abolished, saving £192 a year for those making over £12,570 (saving assumes Class 2 NI would’ve been increased in line with CPI for 2024/25).
Class 4 National Insurance will also be cut by 1 percentage point from 9% to 8% from April. Together this is expected to save around two million self-employed people an average of £350 a year from April.
This is a welcome respite from one of the many pressures self-employed people are facing. However, by keeping NI and income tax thresholds frozen, the Treasury has done nothing to protect us from the misery of fiscal drag. This means the lion’s share of the damage done to our finances from these tax hikes will still continue to be felt years down the line.
It was perhaps what we could always expect from a statement with an over-riding priority to keep a lid on inflation.
ISA gets nicer – shot in the arm for UK investors
Sarah Coles, Head of Personal Finance
Savers and investors will be delighted the chancellor’s taken the opportunity to pay some much-needed attention to ISAs.
Allowing people to pay into multiple ISAs of the same kind in a single tax year from April 2024, and partial transfers of ISAs paid into in a current tax year are both sensible ways to inject much-needed flexibility and simplicity into the system.
For Cash ISA savers, it offers the opportunity to jump on more competitive deals, if they become available later in the tax year.
For those using Stocks and Shares ISAs (and other types of ISA), it protects investors who accidentally pay into more than one ISA of the same type in a tax year.
For example, under the current rules, if you make a single or regular payment into a Stocks and Shares ISA at the start of the tax year, and then try to pay into another Stocks and Shares ISA on the last day of the tax year, you’ll break the rules.
The second ISA provider might end up having to refund your money and you could miss a big chunk of your ISA allowance for that year. This change removes that risk.
There are also a number of smaller technical changes which will ease some of the frustrations of the system – from April people will no longer need to reapply for an existing ISA.
The digitalisation of the reporting system should allow for real time reporting. It will help HMRC to track subscriptions more easily and open the door to allowing people to hold multiple ISAs of the same kind.
It will also make it essential for people to keep their details up to date with HMRC to avoid any delays to applications.
Pension changes – the State Pension triple-lock guarantee and a new lifetime pension
Helen Morrissey, Head of Retirement Analysis
State Pension triple-lock guarantee
The chancellor has confirmed State Pension will rise 8.5% in line with the triple lock. This is the second blockbusting increase in a row.
For someone on the full new State Pension, this would see their pension grow from £203.85 to £221.20 per week from April. For someone who hit State Pension age before 6 April 2016 their full weekly basic State Pension would rise from £156.20 to £169.50.
Today’s announcement will be greeted with relief by pensioners who’ve been struggling with the rising cost of living. With inflation starting to fall back, the 8.5% increase will start to put some much-needed space in people’s budgets.
Lifetime pension consultation
The chancellor also announced a consultation on ‘lifetime pensions’. This is where people could choose to have one pension throughout their working life, rather than having a different one with each employer.
It could give people greater power to manage their financial futures.
With people moving jobs much more frequently, they’ll be less likely to lose track of pensions from previous employers. Having an overarching view of what they’ve accumulated should also help them make more informed retirement decisions.
Research from the Pensions Policy Institute last year estimated there were around 2.8mn lost pension pots, totalling over £26bn washing around the system. This is all money that could be used to boost people’s retirement income and yet it’s at risk of not doing so. This is a system which is failing savers and means people are losing out on retirement income.
There will of course be administrative challenges in terms of getting the new systems in place to make sure contributions are paid to the right pension. However, payroll solutions already exist and can be adapted to meet these challenges.
Appropriate regulation will also make sure people continue to get good value from their pensions across the board. The upshot will be a system more centred on the member, giving them extra choice.
Not sure what the autumn statement means for you?
If you need help or support understanding how the autumn statement impacts you, or what you can do about it, a financial adviser could help.
They can review any existing financial plans you have in place, or create a new one unique to your circumstances, to help you prepare for a better future.
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