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Autumn Statement: Overview of key announcements
While much-anticipated cuts to inheritance tax and income tax failed to materialise, the Autumn Statement did contain more than 100 measures designed to “raise business investment, get more people into work, reduce inflation next year and increase GDP”.
Here, we provide an overview of the key points from Chancellor Jeremy Hunt’s speech to the House of Commons on 22 November, including changes to ISAs, pensions and business investment.
The full details on the autumn statement are available on the Government website.
- From April 2024, savers will be able to pay into multiple ISAs of the same type in a single tax year.
- Partial transfers of funds between ISA providers will be allowed within the tax year.
Under existing rules, an individual can only hold one type of ISA subscription, whether cash or stocks and shares, per tax year. In addition, savers are currently unable to transfer a portion of the funds they have invested in the current tax year, and must instead transfer them in full.
These rules will change from April, however, providing greater flexibility over how savings can be managed. In the case of cash ISAs, it opens the door to the possibility of savers taking advantage of better rates being offered elsewhere.
Further ISA changes include the ability to invest in fractional shares within a stocks and shares ISA and an extension of the Innovative Finance ISA to include long-term asset funds and open-ended property funds. The Chancellor did not, however, use the Autumn Statement to announce an increase to the £20,000 overall ISA allowance.
- Currently, employees pay 12% National Insurance on earnings between £12,570 and £50,270. From 6 January 2024, this rate will be cut to 10%.
- Compulsory Class 2 National Insurance payments will be abolished for the self-employed from April 2024.
- Class 4 National Insurance payments will be reduced for the self-employed from 9% to 8% from April 2024.
The decision to cut NICs has been welcomed by employees, with a worker on average wages expected to reclaim over £450 per year. However, in the absence of increases to the personal allowance and other tax thresholds, commentators have pointed to the fact that this cut should be seen in the context of fiscal drag, where increasing numbers of workers are being pulled into higher bands.
Indeed, the Office for Budget Responsibility (OBR) has forecast that an additional £44.6 billion will be generated in annual tax revenues as a result of fiscal drag, while the planned reduction to National Insurance will save up to £10 billion.
- A ‘pot for life’ consultation to be launched, exploring the right of savers to request that a new employer pays contributions into an existing pension pot.
- An increase to the state pension of 8.5% from April 2024, honouring the ‘triple lock’ guarantee and resulting in an increase of up to £17.35 per week.
Any lingering doubts over the government’s position on the triple lock were quelled with confirmation of an 8.5% increase to the state pension from April 2024. This follows on from a 10.1% increase delivered in April 2023 on the back of robust rates of inflation.
The Chancellor also outlined plans to simplify the pensions market, with a view to providing better outcomes for savers. This included a call for evidence on the idea of a ‘Lifetime Provider Model’, which would give employees the choice of having one ‘portable’ pension pot that could move with them as they change employers.
While campaigners have argued such a move would empower employees and help avoid valuable savings being lost in forgotten pension pots, others have warned of the need for increased financial education and the risk of a potentially higher administrative burden on employers.
Business and skills
- Full expensing to be made permanent.
- An increase to the National Living Wage of 9.8%, taking the hourly rate from £10.42 to £11.44.
- Reform of the Fit Note process and the Work Capability Assessment.
In the wake of the pandemic, the government introduced the super-deduction to ease the pressure on businesses looking to make capital investments in plant and machinery. This was followed by the temporary introduction of full expensing, which allows 100% of costs to be deducted immediately from taxable profits rather than spread out over many years.
In the Autumn Statement, however, the Chancellor confirmed that full expensing would be made permanent, with a view to encouraging investment and boosting productivity.
The increase to the National Living Wage – along with a reduction in the age threshold to 21 and a rise in National Minimum wage rates – was labelled a “record wage boost”, with nearly 3 million workers expected to benefit. While broadly welcomed, the measure has also sparked some concern among employers, with an increase to staff costs potentially impacting on wage budgets and hiring plans.
The Chancellor also announces a series of broader plans designed to tackle unemployment and support the long-term sick and disabled in staying in work. These measures have been met with criticism from some charities and claimants, who fear the reforms will lead to a squeeze on household income.
In summary, while there might not have been any major surprises in the Autumn Statement, the announcements made by the Chancellor introduce some key changes for savers and investors as well as for employers and employees.
If you would like to discuss any of these issues further or understand how they might impact on your financial planning, speak to our team of expert advisers today.
The information contained within this communication does not constitute financial advice and is provided for general information purposes only. No warranty, whether express or implied is given in relation to such information. Vintage Wealth Management or any of its associated representatives shall not be liable for any technical, editorial, typographical or other errors or omissions within the content of this communication.
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