The Chancellor’s Autumn Statement may have contained 110 new or altered measures to help grow our economy, but there are a few important announcements which may affect you, our client.

We’ve gone through the full set of changes to compile this simple guide which will summarise everything you need to know about how your finances may be impacted. 

2024 in finance

Pensions

Honouring the ‘triple lock’ commitment

Jeremy Hunt has confirmed that the government will be honouring its commitment to the pensions ‘triple lock’ in full. 

The triple lock is a commitment to increase state pensions by whichever is highest out of average earnings growth, CPI inflation, or the figure of 2.5%. Having been in place since 2011, the policy is very popular and it provides a great deal of financial security for retirement.

As a result, the government will be increasing the full new state pension by 8.5% to £221.20 per week from April 2024, an increase of up to £900 per year. This increase is noted as one of the largest ever cash increases to the state pension.

Pension pot reforms

The Chancellor also announced that he will consult on giving people one singular pension pot for life, giving pension savers ‘a legal right to require a new employer to pay pension contributions into their existing pension fund’. Under the new “Pot for Life” plans, the majority of workplace pension savers will be in funds of £30bn or larger by 2030.

According to Mr Hunt, these reforms could help to unlock an extra £1,000 per year in retirement for an average earner who starts saving from the age of 18.

Inheritance Tax & National Insurance

Despite rumours circulating in recent weeks, the Chancellor announced that there will be no inheritance tax cuts in this year’s Autumn Statement. However, he has confirmed that National Insurance, the national tax based on earned or salaried income only, IS being cut from 12% to 10% for earnings between £12,570 and £50,270. This means that over 27 million people in the UK will benefit from a higher take-home pay as a result. 

For an individual earning a salary of £35,400 per year, they will save over £450 per year as a result of this reduction. These new policies will come into effect from 6th January 2024, rather than when the new tax year begins in April 2024. 

For employees paying the basic rate of tax, the combined rate of income tax and National Insurance will fall from 32% to 30% – the lowest since the 1980s.

Additionally, Class 2 National Insurance (for the self-employed) will be completely abolished, saving the average self-employed individual £192 per year. Those who pay the Class 4 National Insurance at 9% on all earnings between £12,570 and £50,270 will see this cut by 1 percentage point – to 8% – in April next year.

Investing

Individual Savings Accounts (ISAs) are set to be overhauled to enable savers to pay into multiple accounts of the same type for the first time, from April 2024, with the current £20k tax-free allowance remaining unchanged. Savers will also be able to invest in long-term asset funds, including private equity and real estate.

The government has also stated that it will be extending the tax advantages of venture capital trusts and the enterprise investment scheme by 10 years, to 2035.

Younger people will now benefit from being able to purchase fractional shares, which previously was not possible. Additionally, normal Lifetime ISAs will now only be available to those over 18, as opposed to the age of 16 – with Junior ISAs available up until the age of 18, with no overlap.

Comments from our Director, Russell Brett

Jeremy Hunt’s second Autumn Statement seems a little less fraught when compared to the post Liz Truss clean-up times that we saw 12 months ago.

According to the Office of Budget Responsibility (OBR), the books appear a little healthier now for the government, with stronger than expected tax revenues, driven primarily by earnings and price inflation.

However, this environment is undoubtedly challenging – the Institute for Fiscal Studies (IFS) states that the UK overall tax burden has increased to the highest level since 1948, amounting to about 37% of national income by the next general election, likely to be in 2024.

Nevertheless, the UK is now looking to avoid recession, with +0.6% GDP growth expected for 2023 along with slightly higher growth over the coming years. In addition, inflation is expected to continue to decrease to reach the Bank of England’s target of 2%, by the middle of 2025.

This Autumn Statement’s headlines are clearly centered around National Insurance Contributions (NICS), which will help those still in earned or salaried employment, although there is a message here for employers to note – the employee relative burden of NICS may be coming down, but not for the employer. 

Above current inflation State Pension increases will certainly help those in retirement, while the pension Lifetime Allowance appears destined to be removed, and the more flexible ISA investing should benefit both young and old.

If you have any queries or concerns regarding the Autumn Budget, please don’t hesitate to get in touch with our team, who will be happy to help.