5 key takeaways from the Autumn Statement

On 22 November 2023, chancellor Jeremy Hunt delivered the “Autumn Statement for Growth” containing 110 measures to support economic growth.

According to data from the House of Lords, the total cost of the policy decisions announced in the statement is £14.3 billion in the 2024/25 financial year with the majority of this cost going towards tax reductions rather than increased public spending.

Here are five key takeaways from the Autumn Statement and how they could affect you.

1. National Insurance cut but Personal Allowance and Income Tax thresholds remain frozen

If you’re employed or self-employed, your National Insurance contributions (NICs) will fall this year.

The National Insurance rate for employees was reduced from 12% to 10% on 6 January 2024, benefiting 29 million workers and potentially saving you more than £450 annually if you earn £35,400 a year or more.

If you’re self-employed, from April 2024 you’ll no longer have to pay mandatory Class 2 NICs. And, in 2024/25 Class 4 NICs, paid by self-employed workers on earnings between £12,570 and £50,270, will be cut from 9% to 8%.

This might sound like good news, but the savings you make on NICs may be offset by the freeze in the Personal Allowance and Income Tax thresholds, which the chancellor extended to 2028 in the 2022 Autumn Statement.

The basic Personal Allowance is £12,570 and the Income Tax thresholds are:

Source: Gov.uk

Historically, the Personal Allowance and Income Tax thresholds have increased in line with inflation. Freezing them at 2021/22 levels until April 2028 could potentially mean that you’ll pay more tax as a share of your total income.

However, you could protect your wealth by working with a financial planner to review your overall financial position and make the most of the tax allowances available to you.

2. State Pension increased

In his statement, Hunt confirmed that the “triple lock” will be honoured.

This is a guarantee that the State Pension will go up annually in April in line with the highest of either wage growth, inflation, or 2.5%, as measured in September of the previous year.

Office for National Statistics figures for September 2023, show that average wages rose by 8.5%, which is higher than 2.5% and the inflation rate of 6.7%.

As a result, pensioners will benefit from an 8.5% increase in April 2024, which would potentially give individuals in receipt of the full State Pension around £900 more each year.

Although an increase to the State Pension may offer a nice boost, figures published by the Organisation for Economic Co-Operation and Development show that the UK has one of the lowest State Pensions in the developed world.

So, you might want to consider increasing contributions to your workplace or private pension scheme to ensure that you have enough for the retirement lifestyle you want.

3. You could benefit from more flexible ISAs but the annual allowance remains unchanged

The annual ISA subscription limit of £20,000 remains unchanged in 2024/25 but you will be allowed to deposit money into multiple ISAs of the same type from April 2024. You may also be able to partially transfer money between providers.

These changes offer more choice so it could be easier to find an ISA that aligns with your financial goals. You may also have greater flexibility for moving money between different ISAs.

While this flexibility is welcome, it may have come as a disappointment that the overall ISA limits were not increased in line with inflation. The current £20,000 limit has not changed since 2017 and will be frozen for the 2024/25 tax year. The Junior ISA allowance also remains unchanged at £9,000.

4. “Full expensing” will be made permanent, but Corporation Tax remains largely unchanged

In addition to the abolition of Class 2 NICs for businesses, “full expensing” will be made permanent.

This means that if you have an incorporated business and pay Corporation Tax you will be able to reduce your tax bills by offsetting 100% of your investment in, for example, IT equipment, vans and lorries, chairs and desks, security and telecommunication systems, and machinery against profits in the year of purchase.

In addition, you can deduct the full value of most plant and machinery investments to the Annual Investment Allowance (AIA) of £1 million (2023/24) from your profits before tax. You can claim AIA in the first year of purchase and it applies to all businesses including unincorporated businesses and most partnerships.

If you operate in the retail, hospitality or leisure sectors, you could also benefit from the 75% business rate relief, which the chancellor extended for another year.

This tax relief is predicted to boost investment by £3 billion and it could potentially ease your businesses’ cash flow in the short term.

However, this change only represents an acceleration of tax relief that would otherwise be due over several years. And overall, this “Autumn Statement for Growth” designed to help businesses grow made few significant changes to the Corporation Tax landscape.

5. Inheritance Tax remains unchanged

You might have been hoping that the chancellor would announce cuts to the rate of Inheritance Tax (IHT) or that it might be abolished altogether, but it remains unchanged.

In fact, figures published by the Telegraph suggest that tens of thousands more households will pay IHT than previously due to the threshold being frozen at £325,000 until April 2028.

A financial planner can support you in IHT planning, allowing you to pass on more of your wealth to loved ones. They can also help you understand and navigate the changes outlined above.

Get in touch

If you’d like to learn more about how the Autumn Statement could affect you and your finances, we’d love to hear from you.

Please email us at mail@delaunaywealth.com or call 0345 505 3500.

Please note

This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

The Financial Conduct Authority does not regulate estate planning, tax planning or will writing.