Autumn Statement 2023 Recap
Last Wednesday saw the release of the 2023 Autumn statement. Announcements have been made which will impact individuals like you on a more personal level, as well as the country on a macroeconomic level.
I’m sure you will have seen this publicised already, however we wanted to offer a recap on the statement and what it means for our clients.
Taxation and Wages
If you are employed Perhaps the biggest change in this area is the reduction of national insurance contributions across the board. For class 1 employee payments, this is being cut from 12% to 10% on earnings from £12,571 - £50,270 which is due to affect roughly 27 million people. To put this into perspective, an employee earning £35,400 will receive a tax cut of just over £450 in the 2024/25 tax year.
There’s good news for those self-employed too. Class 2 self-employed national insurance payments are due to be scrapped. Jeremy Hunt, the finance minister, alleges that this will knock £192 off the tax bill of a £28,200 earner. Additionally, class 4 national insurance contributions are undergoing a change. Currently profits from £12,571 to £50,270 are taxed at 9%, this is due to change to 8%, benefitting all self-employed that operate within this tax bracket, but particularly for those paying higher and additional rate tax.
Additionally, the National Living Wage - is to increase from £10.42 to £11.44 an hour from April.
It is hoped that these measures will aid the wider economy after a period of sluggish growth and high interest rates.
Benefits and Pensions
The state pension has remained intact and is due to increase by 8.5% from April 2024 in line with the average earnings index for a full state pension entitlement of £221.20 a week. This shows the government’s commitment to maintaining the triple-lock, which is good news for those currently in receipt of a state pension, alongside those which are due to receive one within the near future.
This may be the most interesting development area to come out of the statement. There is ongoing consultation to determine whether employees could pick the pension scheme that their employers pay into – possibly allowing them to have one pension pot for life.
The full details of this proposal have not been fully publicised, but the general implications would suggest that employees would have to do less administration regarding their pensions, but may find themselves unknowingly bound into a sub-par default scheme, prioritising their convenience over investment growth.
However, don’t get your hopes up of this happening too quickly. Fairey Associates Head of Financial Planning, Paul Richardson, commented “Whilst this is a great idea in principle, it will be hard to implement on a country wide basis due to the complications with payroll systems. It is likely to be an administrative burden, especially for larger companies with thousands of staff.”
Wider economy and Public Finances
The announcements here are a mixed bag from the government. On one hand, it is projected that pre-pandemic living standards are not due to return until 2027-28, suggesting that at least in the short term, the economy is likely to endure more pain, and consumers are generally due to continue to feel more stretched than in comparison to 2019.
On the other hand, inflation is projected to subside back to the Bank of England’s target of 2% by 2025. This could be viewed as a positive as prices look to rise at a slower rate than which they currently are, with a headline inflation figure of 4.6% in October 2023, which is much lower than the headline figure of 11.1% in October 2022.
The government billed this budget as an “Autumn statement for growth”, and the objectives seek to put that into action, but with prices still rising more than target levels and an upcoming general election, there could be less headroom for changes in the spring.
References:
https://www.which.co.uk/news/article/autumn-statement-2023-what-it-means-for-your-money-ahPDN3o9cK1f
https://www.bbc.co.uk/news/business-67276717
https://www.cnbc.com/2023/11/22/autumn-statement-uks-jeremy-hunt-to-announce-tax-cuts.html
Risk Warnings
Last Wednesday saw the release of the 2023 Autumn statement. Announcements have been made which will impact individuals like you on a more personal level, as well as the country on a macroeconomic level.
I’m sure you will have seen this publicised already, however we wanted to offer a recap on the statement and what it means for our clients.
Taxation and Wages
If you are employed Perhaps the biggest change in this area is the reduction of national insurance contributions across the board. For class 1 employee payments, this is being cut from 12% to 10% on earnings from £12,571 - £50,270 which is due to affect roughly 27 million people. To put this into perspective, an employee earning £35,400 will receive a tax cut of just over £450 in the 2024/25 tax year.
There’s good news for those self-employed too. Class 2 self-employed national insurance payments are due to be scrapped. Jeremy Hunt, the finance minister, alleges that this will knock £192 off the tax bill of a £28,200 earner. Additionally, class 4 national insurance contributions are undergoing a change. Currently profits from £12,571 to £50,270 are taxed at 9%, this is due to change to 8%, benefitting all self-employed that operate within this tax bracket, but particularly for those paying higher and additional rate tax.
Additionally, the National Living Wage - is to increase from £10.42 to £11.44 an hour from April.
It is hoped that these measures will aid the wider economy after a period of sluggish growth and high interest rates.
Benefits and Pensions
The state pension has remained intact and is due to increase by 8.5% from April 2024 in line with the average earnings index for a full state pension entitlement of £221.20 a week. This shows the government’s commitment to maintaining the triple-lock, which is good news for those currently in receipt of a state pension, alongside those which are due to receive one within the near future.
This may be the most interesting development area to come out of the statement. There is ongoing consultation to determine whether employees could pick the pension scheme that their employers pay into – possibly allowing them to have one pension pot for life.
The full details of this proposal have not been fully publicised, but the general implications would suggest that employees would have to do less administration regarding their pensions, but may find themselves unknowingly bound into a sub-par default scheme, prioritising their convenience over investment growth.
However, don’t get your hopes up of this happening too quickly. Fairey Associates Head of Financial Planning, Paul Richardson, commented “Whilst this is a great idea in principle, it will be hard to implement on a country wide basis due to the complications with payroll systems. It is likely to be an administrative burden, especially for larger companies with thousands of staff.”
Wider economy and Public Finances
The announcements here are a mixed bag from the government. On one hand, it is projected that pre-pandemic living standards are not due to return until 2027-28, suggesting that at least in the short term, the economy is likely to endure more pain, and consumers are generally due to continue to feel more stretched than in comparison to 2019.
On the other hand, inflation is projected to subside back to the Bank of England’s target of 2% by 2025. This could be viewed as a positive as prices look to rise at a slower rate than which they currently are, with a headline inflation figure of 4.6% in October 2023, which is much lower than the headline figure of 11.1% in October 2022.
The government billed this budget as an “Autumn statement for growth”, and the objectives seek to put that into action, but with prices still rising more than target levels and an upcoming general election, there could be less headroom for changes in the spring.
References:
https://www.which.co.uk/news/article/autumn-statement-2023-what-it-means-for-your-money-ahPDN3o9cK1f
https://www.bbc.co.uk/news/business-67276717
https://www.cnbc.com/2023/11/22/autumn-statement-uks-jeremy-hunt-to-announce-tax-cuts.html
Risk Warnings
- The value of an investment and the income from it could go down as well as up.
- All investing is subject to risk, including the possible loss of the money you invest.
- Past performance is not a reliable indicator of future results.
- Diversification does not ensure a profit or protect against a loss.
- Please remember that all investments involve some risk. Be aware that fluctuations in the financial markets and other factors may cause declines in the value of your account. There is no guarantee that any particular asset allocation or mix of funds will meet your investment objectives or provide you with a given level of income
- This communication is for general information only and is not intended to be individual advice. It represents our understanding of law and HM Revenue & Customs practice as at 30th November 2023. You are recommended to seek competent professional advice before taking any action.
