The Autumn Statement delivered yesterday by Chancellor of the Exchequer, Jeremy Hunt, had long been earmarked by many to include a host of tax cuts and pro-business measures.
While the headline announcement from yesterday’s Statement was a January reduction in National Insurance, it was silent on inheritance tax with no changes announced.
However, the Chancellor did confirm that the Government will maintain the ‘triple lock’ on the State Pension. He also announced plans for a ‘pot for life’ pension reform, as well as extending key business rate reliefs.
Here’s a look at the key points from yesterday’s Statement.
Triple lock honoured
The state pension will increase by 8.5% from April 2024 to £221.20 a week. The ‘triple lock’ ensures the state pension rises each year, by average earnings growth, Consumer Price Index (CPI) inflation, or 2.5% - whichever is higher. 8.5% matches average earnings growth this year, following the increase in April this year by 10.1%. This will give individuals some welcome inflationary protection, in what has been an extremely difficult period for investments in real terms.
LTA abolishment still on track for April 2024
While not announced as part of the Statement, it has also been confirmed that the abolishment of the Lifetime Allowance (LTA) charge on pensions, announced in the Spring Budget, is still on track to be introduced in April.
Pension for life reform
The Chancellor announced plans for most pension pots to be managed in schemes over £30bn by 2030, with Local Government pension scheme funds to be invested in pools of £200bn or more by 2040. Workers will be given the legal right to nominate the pension scheme employers pay contributions to. This move would help with the number of “lost” pensions and allow people to tidy up their retirement savings.
It is important to note however, that the practicalities of a reform such as this will perhaps prove to be a lot more challenging than what the government is anticipating. While this is the type of action that will potentially be a positive for individuals relying on workplace pensions, we should keep an eye on how the government navigate what I imagine will be a complex undertaking.
ISAs gain additional flexibility
The annual subscription limits for ISAs (£20,000), Junior ISAs (£9,000), Child Trust Funds (£9,000), and Lifetime ISAs (£4,000, excluding government bonus) will remain the same but additional flexibility will be granted.
ISA holders will be able to deposit money into multiple ISAs of the same type each tax year from April 2024 and will also be able to partially transfer money between providers.
The digitalisation of the reporting system should allow for real time reporting and will help HMRC track subscriptions more easily, allowing people to hold multiple ISAs of the same kind (cash / stocks and shares etc).
It will also make it essential for people to keep their details up to date with HMRC to avoid any delays to applications.
Investors with an Innovative Finance ISA will also be able to invest their money in a greater range of assets, including long-term asset funds and open-ended property funds with extended notice periods.
EIS and VCTs to be extended to 2035
Not directly mentioned in the statement, but there has also been confirmation that the sunset clause will move out to 2035, which is great news for the UK economy. Previously, a sunset clause was in place, as part of European Union state rules, whereby VCT relief was only available to subscribers before April 2025. As part of yesterday’s Statement, the Chancellor confirmed plans initially proposed by his predecessor, Kwasi Kwarteng, in which the sunset clause will be extended to April 2035. This ensures an effective investment vehicle continues to remain viable going forward and provides a further boost to UK-startups.
Business tax changes
The Chancellor confirmed the permanency of "full expensing" for businesses, allowing them to claim corporation tax relief for every £1 invested in IT, machinery, and equipment. The government will also freeze the small business multiplier for an additional year and extend the 75% discount on business rates for retail, hospitality, and leisure businesses for another year.
National Insurance cuts for employed and self-employed
Jeremy Hunt described the cut of National Insurance from 6 January from 12% to 10% as “the biggest tax cut since the 1980s.” It is estimated that it will impact 27 million working people, while Class 2 National Insurance charges for self-employed workers earning more than £12,570 will be scrapped. The Class 4 rate (for self-employed individuals earning between £12,570 will be reduced from 9% to 8%, resulting in savings of up to £350 per year. The Chancellor hopes that this change will be enough to help people, without fuelling higher inflation and increased cost of borrowing for longer.
Economic growth forecast checked
While the Chancellor framed the Autumn Statement as one for growth – given recent economic and inflationary progress alongside tax cuts – the Office for Budget Responsibility (OBR) has downgraded economic growth forecasts, from 1.8% in 2024 and 2.5% in 2025, to 0.7% and 1.4% respectively.
Other announcements from yesterday include the uplifting of the National Living Wage in April 2024, from £10.42 to £11.42, while Universal credit and disability benefits will increase by 6.7%, in line with September inflation. Extra funding was also committed to manufacturing and artificial intelligence sectors.
Markets have digested the information and there has been very little movement in the pound or FTSE 100, which is in slight negative territory, with the more domestically focused FTSE 250 not moving much either. Our December market update will look at these reactions in more depth and reflect on what has been another eventful year for markets.
In the meantime, if you have any questions about your financial plan, please don’t hesitate to contact your adviser.
— Aled Phillips
Chartered Financial Planner & Commercial Director
Call: 01633 851805
Email: [email protected]
Office: 5 & 6 Waterside Court, Albany St, Newport, NP20 5NT
Aled Phillips, Chartered Financial Planner & Commercial Director, was interviewed by Rhys Hicks.
The contents of this article do not constitute financial advice in any way; if you have any concerns about your finances you should talk to your financial adviser. The value of your investments can go down as well as up.