After the disastrous Autumn mini Budget and its subsequent revision last year, this Autumn Statement has been highly anticipated. The Government’s Autumn Statement was delivered by Chancellor Jeremy Hunt on Wednesday 22 November, and included a raft of changes to taxation, business rates, and pensions.
Jeremy Hunt called his plan “an Autumn Statement for growth”, stating that “our plan for the British economy is working. But the work is not done.” The plans focused heavily on measures to support British business and incentivise the unemployed population to return to work, but there were some significant changes to pensions proposed, too.
Personally, it was disappointing on many counts. Here is a summary of the changes and what they might mean for you.
Despite rumours of a decrease in income tax rates these remain unchanged. See the tax tables here for current rates.
Capital Gains Tax
There were no additional changes to the Capital Gains Tax rates or allowances. But remember that from 6 April 2024, the individual annual exemption allowance will reduce to £3,000.
The potential Inheritance tax rate changes swirling in the press last week did not materialise.
Following much speculation and party pressure over cutting the rate of Inheritance Tax (IHT), Mr Hunt concluded his Statement without any mention of it whatsoever. That means that, for now, IHT remains at 40%.
Inheritance Tax is paid on estates that total more than £325,000. Couples can share their allowance, bringing the total for a married couple to £650,000. Over the past decade, the number of families who fall into the allowance bracket has risen. In 2020-21, there were 27,000 deaths that resulted in an IHT charge, up from just 15,000 in 2010.
It is possible that Mr Hunt may wait for the Spring Budget before making any amendments to the death duty. We will be watching it closely.
Individual Savings Account (ISA)
The 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
A raft of welcome changes announced were:
- The one ISA of each type of 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 now partially transfer current year subscriptions in-year between providers from April 2024.
- Fractional shares will now be permitted investments within an ISA.
- 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.
- Permitted investments within an Innovative Finance ISAs will be expanded to include Long-Term Asset Funds and open-ended property funds with extended notice periods from April 2024.
- Finally, ISA reporting will be digitalised enabling the development of tools to support savers and the requirement to reapply for an existing ISA annually (where no subscriptions made) ill be removed from April 2024.
National Insurance (NI)
There was a triple ‘giveaway’ on NI:
- The main rate of Class 1 employee NICs will be cut from 12% to 10% from 6 January 2024. This will provide 27 million working people with a prompt increase in net pay, with the average worker on £35,400 receiving a tax cut of over £450.
There was no change to the employer rate remaining at 13.8%.
- For the self-employed, the first of two cuts will see the main rate of Class 4 self-employed NICs reduce from 9% to 8% from 6 April 2024. This will benefit around 2 million individuals.
- The self-employed currently must pay two separate NICs charges to access contributory benefits. The Government will provide the second cut for those earning £6,725 and above by abolishing Class 2 NICs from 6 April 2024 whilst maintaining access to contributory benefits, including State Pensions.
For those with profits under £6,725 and others who pay Class 2 NICs voluntarily to get access to contributory benefits including the State Pension, will continue to be able to do so at the current rate of £3.45 per week (was due to increase to £3.70 but will not now).
Together these two cuts will provide an average self-employed person on £28,200 with a saving £350 in 2024-25.
Despite speculation that the triple lock may be broken, the Chancellor announced that the Government will indeed be honouring it. This means that April’s 2024 projected growth figure stands at 8.5%. In real terms, this means a rise of up to £900 across the year, bringing the total to £11,502.40 yearly. This announcement was met with cheers in the chamber.
The triple lock protection for State Pensions was introduced in 2010 to guarantee that it would rise in line with wage growth and inflation.
He also announced that he will open a consultation on plans to give employees the right to choose where their employer pension contributions are paid to. The Chancellor called this proposed scheme a ‘pot for life’, stating that the reform could help to unlock “an extra £1,000 a year in retirement for an average earner saving from [the age of] 18”.
This would certainly simplify pensions for consumers and reduce the number of small ‘forgotten’ pots that accumulate when a person has many employers over their lifetime. As the shape of the workforce has shifted away from ‘lifers’ staying with one company through until retirement and towards a more ‘portfolio’ career path, this proposed reform would bring pensions rules in line with modern workforce patterns.
Abolition of the Lifetime Allowance
The Government confirmed the abolition of the Lifetime Allowance will still go ahead from 6 April 2024. The Finance Bill will be introduced to parliament shortly.
The Chancellor dedicated a large portion of his Autumn Statement to measures for business growth, with an extra focus on small business.
Among these measures were business rate relief extensions and freezes on alcohol duty to support the hospitality industry.
The ‘full expensing’ tax break introduced in this year’s Spring Budget has been made permanent, which the Chancellor called “the biggest business tax cut in modern British history.” This means that for every £1 that a business invests in IT, machinery, and equipment, they can claim back 25p in corporation tax.
It is hoped that the changes will help the UK enter a period of growth now that inflation has significantly subsided. The latest figures from the Office for Budget Responsibility (OBR) predict that inflation will fall to 2.8% by the end of 2024, although experts have advised that banks may be slow to follow suit with their interest rates.
If you have any questions about any of the changes in the Chancellor’s Statement or would like to talk through how it may affect you, please do get in touch.
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