Autumn Statement 2023 – What You Need To Know

The Chancellor, Jeremy Hunt was faced with a difficult balancing act trying to manage the need to keep the rate of inflation under control coupled with calls for tax cuts. In this insight we share with you the Autumn Statement 2023 – What You Need To Know.

It’s been a challenging year with inflation dominating headlines. While inflation has fallen, it’s still higher than the Bank of England’s 2% target at 4.6% in the 12 months to October 2023.

Better than expected public finances allowed Hunt to help individuals with an increase in the State Pension, via the Triple Lock, by 8.5%. a cut to national insurance contributions and an uprating of all working age benefits in full, by inflation (6.7%).

Key takeaways

  • State Pension triple-lock guarantee of 8.5%
  • 2% cut to Class 1 National Insurance
  • Self-employed NI cuts
  • ISAs become more flexible
  • A lifetime pension consultation – ‘pension for life’
  • Technical changes to pension rules

The State Pension “triple lock” will remain in place

Mr. Hunt confirmed during the Autumn Statement that the State Pension “triple lock” will be honoured. The announcement will benefit around 12 million people.

Under the “triple lock”, the State Pension increases each year by the higher of:

  • Inflation, as measured by the Consumer Prices Index (CPI) in September (of the previous year)
  • The average increase in wages across the UK from May to July (of the previous year), or
  • 2.5%.

Wage growth of 8.5% means someone on the full new State Pension will receive more than £900 a year extra in 2024/25.

Similarly, Pension Credit will also rise by 8.5% in April 2024.

National Insurance cut for employees and self-employed workers

The biggest headlines have been reserved for changes to National Insurance:

  • The main rate of Class 1 employee NICs will be cut to 10% from 6 January 2024. This will provide 27 million working people with a prompt increase in net pay
  • For the self-employed, the first of two cuts will see the main rate of Class 4 self-employed NICs reduce to 8% from 6 April 2024. This will benefit around 2 million individuals.
  • The self-employed Class 2 NICs charges to access contributory benefits will be cut from 6 April 2024.

Individual Savings Account (ISA)

The current government has stated its intention to simplify ISA rules which have become increasingly complicated over the years as new ISA variants have been introduced. The main announcement was that ISA (£20,000), Junior ISA (£9,000), Lifetime ISA (£4,000 excluding Government bonus) and Child Trust Fund (£9,000) limits will remain at their current levels for 2024/25

Welcome changes announced were:

  • The one ISA of each type rule will be abolished – a saver will now be allowed to subscribe to multiple ISAs of the same type every year from April 2024.
  • The full transfer of current year subscriptions rule will also be abolished – a saver can partially transfer current year subscriptions in-year between providers from April 2024.
  • Adult ISAs will be harmonised so that they are available to age 18 and over. This currently applies to Stocks and Shares ISA but Cash ISAs will go from 16 years old to 18 from April 2024.
  • Changes are planned to expand the range of investments that can be held in ISAs

Pensions

Pension Lifetime Allowance confirmed

The previously reported abolition of the pension Lifetime Allowance will take effect from 6 April 2024. The legislation to achieve the abolition is quite complex and the Autumn Statement clarified some technical anomalies.  We plan to study the small print in detail to understand the impact on our clients.

Pension for Life Plans

Most of us have fragmented working careers with several separate pension arrangements and Innes Reid have long specialised in helping clients simplify and consolidate their pensions in a single pension pot. To move this process forward, the Chancellor has announced plans for a new ‘Pension for Life’ pension. Under the proposals, pension savers would have the legal right to choose the scheme their employer pays pension contributions to. This move could help workers with fragmented careers to manage their retirement savings and multiple pensions.

If you have any questions about how the Autumn Statement will affect you and your finances, please get in touch.

Please note: Autumn Statement 2023 – What You Need To Know: All information is from the Autumn Statement 2023 document and the government’s Autumn Statement news bulletin.

The content of this Autumn Statement summary is intended for general information purposes only. The content should not be relied upon in its entirety and shall not be deemed to be or constitute advice. 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.

 

 

 

 

 

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