Autumn Statement – what the announcements mean for your finances
Chancellor Jeremy Hunt promised to ‘reduce debt, cut taxes and reward work’ in his ‘Autumn Statement for growth’, but what might the changes he announced mean for your personal finances?
In the lead up to the Autumn Statement, we discussed the changes that were rumoured to have been announced in this article.
These speculated changes included:
- Reducing inheritance tax
- Announcing an additional ISA allowance for investment into UK companies
- Changing the state pension triple lock calculation to limit next year’s state pension increase
In the end, none of these changes were introduced, with shadow chancellor Rachel Reeves claiming Hunt wanted to reduce inheritance tax but that he “couldn’t get away with it in the middle of a cost of living crisis”. Instead, the headline grabbing change was the 2% reduction to employee national insurance contributions between £12,571 and £50,271. This will equate to an annual saving of c. £754 p.a. to those earning over £50,270 p.a. with effect from January 2024. Additionally, there were National Insurance reductions for the self-employed, with Class 2 contributions effectively abolished and Class 4 contributions reduced from 9% to 8% between £12,571 and £50,271 with effect from April 2024.
However, this will only go part of the way to make up for the impact of the continued freezing of the income tax bands, which will remain frozen until 2028. Indeed, as a result of higher inflation, higher interest rates and frozen tax bands, the Office for Budget Responsibility (OBR) states “Living standards, as measured by real household disposable income per person, are forecast to be 3.5 per cent lower in 2024-25 than their pre-pandemic level.”
Separately, the speculated ISA allowance increase for investments into UK companies did not materialise and pensioners will be pleased to hear Mr Hunt state the government will “honour our commitment in full” as the state pension rises by 8.5% next year.
Regarding pensions, workers will hope a new legal right for their new employer to pay into their previous defined contribution pension scheme will simplify pension planning going forward and will mean an end to the accumulation of multiple schemes as individuals move between companies.
This was an Autumn Statement with half an eye on an upcoming general election, with announcements that should put more money in the pockets of workers and pensioners alike. Mr Hunt repeatedly referred to the OBR’s forecasts during his announcement as he tried to rebuild credibility, a little over a year after Liz Truss and Kwasi Kwarteng’s ‘mini-budget’, prior to which the OBR was not asked to run forecasts. Overall, Mr Hunt will have been grateful that he was able to use some of the fiscal headroom provided by then Chancellor, now Prime Minister, Rishi Sunak’s decision to freeze income tax bands back in 2021 to offer a national insurance cut and significant state pension rise to the voting public.
The opinions shared in this article are solely those of the individual and they do not necessarily reflect those of The Private Office.