What the Autumn Statement means for you and your money
“Today’s announcement will be greeted with relief by pensioners who have been struggling with the rising cost of living, and will have been unsettled by speculation of a lower rise.”
The Chancellor Jeremy Hunt unveiled several tax-cutting measures in his Autumn Statement, but despite his apparent largesse, the freezing of tax thresholds means that many people may not end up much better off.
National Insurance will be cut from 12% to 10% with effect from January 6, the Chancellor said, whilst for the self-employed, from 6 April 2024, Class 2 NICs will be abolished and the Class 4 rate will be cut from the current 9% to 8% on profits between £12,570 and £50,270. The rate remains at 2% on profits over £50,270. According to the Chancellor, this move should save the typical self-employed worker earning £28,200 a year £350 in NICs.
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However, the freeze on income tax thresholds means that any financial benefit may be reduced if taxpayers end up in a higher tax band.
Chris Etherington, tax partner at RSM UK, said: ‘Whilst the Chancellor has cut National Insurance Contribution (NIC) rates for employees and the self-employed, he has opted to leave the tax and NIC thresholds frozen. Ordinarily, the income tax personal allowance and the basic rate limit would have increased from April 2024. This increase would typically have been in line with the 6.38% percentage increase in the consumer price index in September 2023 from the year before.
“This means that the income tax personal allowance would have been £13,380, rather than £12,570. Similarly, the higher rate threshold would have increased to £53,580, rather than the current amount of £50,270. As a result, more individuals will be dragged into the tax net and higher tax rates when they otherwise wouldn’t have.”
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Other measures announced in the Autumn Budget include an 8.5% increase in the State Pension next April, in line with the government’s ‘triple lock’ pledge. Under the triple lock guarantee, the State Pension which means that it must increase by either September’s price inflation, average wage growth, or 2.5%, whichever is higher. Average wage growth is the highest of these three at 8.5%, which is why the State Pension will increase by this amount.
Helen Morrissey, head of retirement analysis at Hargreaves Lansdown, said: “For someone on the full new state pension this would see their pension grow from £203.85 to £221.20 per week from April. For someone who hit state pension age before 2016 their full weekly basic state pension would rise from £156.20 to £169.50.
“Today’s announcement will be greeted with relief by pensioners who have been struggling with the rising cost of living, and will have been unsettled by speculation of a lower rise.”
The Chancellor also confirmed a 6.7% increase in benefits including Universal Credit. However, Universal Credit claimants could face much harsher sanctions if they can’t demonstrate that they are committed to finding work.
Another of the big changes announced in the Autumn Statement was the possible introduction of pension ‘pots for life’ which would enable savers to effectively take their pension with them when they move employers.
However, Elliott Silk, head of financial planning at wealth management business atomos, warned that such as change could place a burden on employers and payroll to pay contributions into multiple different pension plans. He said: “It may also raise the cost of pensions, as providers might not be able to offer the low charges that they do on group personal pension plans because the efficiency of being paid contributions from one source will be diminished. It may be easier for people to accumulate through one plan, but we will continue to watch this space.”