The Chancellor has announced cuts to National Insurance, a series of ISA reforms and an 8.5% rise in the state pension as part of his autumn statement,
Jeremy Hunt said the economy was “back on track” as he cut taxes and pushed for business growth ahead of next year’s election.
He said he had 110 development measures, but joked in his speech, “Don’t worry, I won’t consider them all.”
agree moneyweek
Subscribe to Moneyweek today and receive your first six magazine issues absolutely FREE
GET 6 FREE POINTS
Sign up for Money Morning
Don’t miss the latest investing and personal finance news, market analysis, plus money-saving tips with our free twice-daily newsletter.
Don’t miss the latest investing and personal finance news, market analysis, plus money-saving tips with our free twice-daily newsletter.
With the Bank of England forecast stable economy In 2024, Hunt stressed that his plan would deliver growth and reduce the national debt.
We take a look at the various measures announced, and how they could affect your personal finances.
National insurance reduced by 10%
Around 27 million people will see their National Insurance (NI) cut. Currently earnings between £12,571 and £50,271 are taxed at 12% and earnings above that at 2%.
But from January 6, 2024, the 12% rate will fall by 2 percentage points to 10%. The Chancellor said he would bring forward urgent legislation to implement this before the start of the 2024-25 tax year.
The average employee on a £35,400 salary will save around £450 per year. Anyone earning more than £50,270 will save a maximum of £754 per year.
This is the third change in NI in three years – after Increase in April 2022 And this reverse In November of the same year.
National Insurance Reform for the Self-Employed
The Chancellor said he wanted to support the self-employed such as “plumbers, farmers and delivery drivers” by reforming and simplifying their taxes.
Class 2 National Insurance Contributions (NICs), which are paid at a fixed rate of £3.45 per week, will be abolished. This will save the average self-employed person £192 per year. The important thing is that they will retain access to state benefits.
Hunt also said he would reduce the Class 4 NIC rate from 9% to 8% in April. These two reforms will save approximately two million self-employed workers an average of £350 per year.
George Parker, manager of accountants Blick Rothenberg, said the scrapping of Class 2 NICs was a welcome change, but added: “The government was going to scrap it in 2018. My gut feeling is that scrapping it was aimed at HMRC’s administration. This was to reduce the cost of production, which was greater than the revenue it generated – rather than for the benefit of the self-employed.”
“Pension pot for life”
Government to consult on giving legal rights to pension savers “Pension pot for life”, Its purpose is to help workers keep track of their retirement savings when changing jobs.
Instead of the employer choosing the pension plan, the employee will nominate where they wish to contribute.
The reforms could save an extra £1,000 a year in retirement income for the average earning person aged 18.
Avik Bhattacharya, interim director of the Social Market Foundation, a think tank, said moving from an employer-led pension system to one where each person has his or her own pot for life could help “avoid the chaos and inconvenience that would occur.” Many of us have experienced accumulating multiple – often small – utensils for different purposes.”
He added: “More fundamentally, it could shift the onus for pension savings from owners to workers, which has the potential to boost engagement, personalization and value for money.”
Triple lock awarded
Hunt said the triple lock would be respected, meaning the state pension would rise by 8.5% in April.
The move will bring the full new state pension to £221.20 a week or £11,502 a year.
Hunt said it was “one of the largest cash increases ever to the state pension”.
There is speculation that the government could have increased the state pension slightly.
Making ISAs more flexible
The Autumn Statement document revealed that the government will make changes to simplify ISAs and provide more choice, “meaning it will be easier for people to choose the best ISA accounts for their needs and move money between them”.
It added: “This includes digitizing the ISA reporting system to make it more effective, as well as expanding the investment opportunities available in ISAs to include long-term asset funds and open-ended property funds with extended notice periods.” “
From April 2024, the government will allow multiple subscriptions to the same type of ISA each year, while also allowing partial transfers of ISA funds over the year between providers.
The ISA allowance will continue to be £20,000 in 2024-25 (and the subscription limit for junior ISAs and child trust funds will remain at £9,000). The lifetime ISA allowance will remain at £4,000.
increase in living wage
Treasury announces biggest increase ever national living wageWorth over £1,800 per year for a full-time worker.
The hourly rate will rise by 9.8% in April from £10.42 to £11.44. Eligibility for the National Living Wage will also be increased by reducing the minimum age limit from 23 to 21.
The Department of Business and Trade estimates the pay rise will benefit 2.7 million workers.
Gail Izzat, Managing Director of Workplace standard lifecommented: “Confirmation that the living wage will rise to £11.44 and apply to 21 and 22-year-olds for the first time from next April is welcome news and will provide some relief from the inflationary pressures that are plaguing the lowest Affects paid people in the last 18 months.”
He added: “The added benefit of bringing more people into the scope of pension auto-enrolment is that anyone aged 22 and over earning more than £10,000 will become eligible.”
National minimum wage rates for young workers will also increase: the wage for 18-20 year olds will increase by £1.11 to £8.60 an hour, while the minimum hourly wage for an apprentice will rise from £5.28 to £6.40.
What else did Hunt announce?
- Universal Credit and disability benefits will increase by 6.7%, in line with September’s inflation rate.
- A new £2.5 billion back to work plan for people with long-term health problems, disabilities and difficulties finding employment, including tougher restrictions for those who could work but choose not to.
- A tax exemption that allows companies to deduct the full cost of investment in machinery and equipment from their tax bill is being made permanent. The Chancellor called it “the biggest business tax cut in modern British history”. This policy was scheduled to end in 2026.
- The Government will legislate to remove the pension lifetime allowance in the Autumn Finance Bill 2023. The measure will clarify the taxation of lump sums and lump sum death benefits, and the application of security, as well as the tax treatment and transitional arrangements for foreign pensions. This will be effective from 6 April 2024.
- Investors could be watching for a NatWest retail share offer in the next 12 months, as Hunt said the government remains committed to exiting its shareholding, subject to market conditions and the sale representing value for money.
- The Mortgage Guarantee Scheme, which supports the availability of 95% loan-to-value mortgage products, will be extended for an additional 18 months until the end of June 2025.
- The sunset clause for EIS and VCT income tax relief will be extended to April 2035. They had earlier limited the tax relief to shares issued before April 6, 2025.
- There will be a ban on alcohol duty till August 1 next year.
