Chancellor Jeremy Hunt gave his autumn statement at lunchtime on Wednesday 22nd.
The autumn statement has become part of the calendar. Coming some eight months after the budget is announced back in spring, it gives the government a chance to update us all on how the policies introduced then have affected the pounds in our pockets.
We already knew that inflation is almost half what it was when the budget was announced, and recession worries may have receded. The Office for Budget Responsibility remain cautious, but predicted headline inflation will fall to 2.8% by the end of 2024, while the UK economy is expected to grow by 0.6% this year.
Those with an eye on the treasury may have seen that – thanks to inflation – the government may have more cash coming in than expected, providing opportunities for the chancellor to be generous.
In fact, Jeremy Hunt set a cautious, but optimistic tone.
“After a global pandemic and energy crisis, we have taken difficult decisions to put our economy back on track. We have supported families with rising bills, cut borrowing and halved inflation.
Rather than a recession, the economy has grown. Rather than falling as predicted, real incomes have risen. Our plan for the British economy is working.”Jeremy Hunt
He said the economy was “back on track”. But did this all mean the Chancellor had some good news to share with us?
That might depend on who we are, and whether we are working, retired or a jobseeker, or running a business – or a saver.
The Chancellor had hinted at tax cuts in the run up to the statement, but in the event, it was a cut to National Insurance which was his headline change. He announced the main rate of National Insurance will be cut by two percentage points from 12% to 10% from January.
This will save the average worker around £450 in 2024-25.
The self-employed may also benefit. Self-employed National Insurance (Class 4 NICs) will be cut from 9% to 8% from April 2024 for around 2 million people, saving the average self-employed person £350 a year.
Class 2 National Insurance will be abolished. Class 2 National Insurance is a flat rate charge of £3.45 a week, for self-employed people earning more than £12,570. The average self-employed person will save £192 a year.
Despite the cuts, remember NI and income tax bands – or thresholds – are still frozen until 2028. That means a pay rise could result in a tax hike. So-called fiscal drag (so called because it may drag you into a higher tax bracket) will net the Treasury around £46bn by 2028 and create 3.2 million new income taxpayers. This means that the need to make sure you are not paying too much tax is more important than ever. At Continuum we can help.
Perhaps even more important for those affected, the National Living Wage will rise by 9.8% to £11.44 an hour. This is a real increase of up to £1800 for a full-time worker and will apply to those aged 21 or over.
- Main rate of National Insurance cut from 12% to 10% from 6 January
- Class 2 National Insurance – paid by self-employed people earning more than £12,570 – abolished from April.
- Class 4 National Insurance for self-earning between £12,570 and £50,270 – cut from 9% to 8% from April.
- Legal minimum wage – known officially as the National Living Wage – to increase from £10.42 to £11.44 an hour from April.
- New rate applies to 21 -year-old workers, rather than just those 23 and over.
You may find a little more cash in your pocket. A chat with a Continuum expert might show you ways to make that cash work for you.
Jeremy Hunt said the Government was fully committed to the pension triple lock, and that as a result of inflation the New State Pension will rise by 8.5% next April. This will become £221.20 a week, worth up to £900 more a year and totalling £11,502 per year.
This will come as good news to 1.1 million people who receive the new state pension.
The government will also consult on giving pension savers the right to have a “pension pot for life”. The idea is to help workers keep track of their retirement savings as they move jobs.
A larger pension is welcome – but your future is too important to leave to the generosity of this and other chancellors. Talk to a Continuum expert about making the most of proposed changes to pension rules.
Jobseekers and those on benefits
Those on benefits may be suffering from the effects of inflation. The chancellor confirmed a major overhaul of the benefits system and an increase in Universal Credit and other benefits from next April by 6.7% in line with September’s inflation figure.
A family with two children on standard allowances should receive about £900 more in the year from April. The chancellor said the average increase would be £470 for 5.5 million households next year.
In addition, the support provided via the benefits system through housing benefit or universal credit has been unfrozen. It will now be worth 30% of local market rents.
Jobseekers will be supported by a package of extra funding designed to get them back into work – but may need to reapply for benefits if they are out of work for more than 18 months.
- Universal Credit and other working-age benefits to increase by 6.7% from April, in line with September’s inflation rate
- Local Housing Allowance rates to be unfrozen and increased to 30% of local rents.
- Work Capability Assessment to be reformed to reflect availability of home working.
- Funding of £1.3bn over the next five years to help people find jobs.
- Further £1.3bn to help people who have been unemployed for over a year.
- Claimants deemed able to work but refuse to seek employment to lose benefits.
Running a business
The government is making permanent its post-covid emergency tax break for businesses which allows them to offset investment in machinery, IT and equipment against corporation tax. This is “full expensing” and means that for every million pounds a company invests, they get £250,000 off their tax bill in the same year.
There are also concessions 75% business rates discount will be extended by another year.
- “Full expensing” tax break – allowing companies to deduct spending on new machinery and equipment from profits – made permanent.
- The 75% business rates discount for retail, hospitality and leisure firms extended for another year.
Understanding the potential of these changes for you and your business could be essential. Talk to us at Continuum.
At the moment, you can only open one of each type of ISA in a single tax year – for example, one cash ISA and one stocks and shares ISA. The Chancellor announced a relaxation in the rules, and savers will be allowed to open multiple ISAs of the same type every year from April 2024.
Talk to a Continuum expert about your investment strategy, and how an ISA might help you reduce your tax bill.
What happens now?
Analysis of the statement continues, but the Government’s plans for the economy are clearly intended to get more people into work and help to continue reducing inflation while stimulating businesses and hence the economy.
Its actual impact on your own personal finances will depend on your particular circumstances. If you are employed or a business owner you could be celebrating – but whatever your position, getting an expert to uncover the potential – and the pitfalls – in the chancellor’s message may help you be better off.
For help with your tax questions, we have a simple statement to make. Just call us at Continuum.
The information contained in this article is based on the opinion of Continuum and does not constitute financial advice, you should seek independent financial advice before embarking on any course of action.
The Financial Conduct Authority does not regulate taxation advice.
Levels, bases and reliefs from taxation are subject to individual circumstances and may be subject to change.
A pension is a long-term investment, the fund value can go down as well as up and this can impact the level of pension benefits available.
Stocks and Shares ISAs do not include the same security of capital which is afforded with a deposit account.