On Wednesday 22nd November the Chancellor Jeremy Hunt stood up and delivered the government’s Autumn Statement 2023.  

It feels like we have seen quite a lot of Mr Hunt since the end of the Liz Truss premiership back in October last year.  

The government were keen to praise themselves for the fact we are seeing inflation falling and an economy still growing very slightly. In reality there is little any government actually does in reducing inflation. There is a natural cycle to these things and it’s actually the independent Bank of England that has the job of maintaining the inflation target.  

There wasn’t much to get excited about with this statement. Perhaps there will be in spring next year with the full Budget which is likely to be just before an election. I’m sure the Chancellor will be much more generous with tax cuts then. 

 

Secret tax increases continue in the Autumn Statement 2023 

 

Going back to early 2021, Joe Biden was confirmed as the new US President, we were coming out of COVID-19 lockdowns and restrictions, the Olympics took place in Tokyo and the European football Super League got announced and then quickly suspended.  

This was also a time when the Income Tax Personal Allowance was last increased from £12,500 to £12,570. 

The Personal Allowance is the amount of income you can earn from work, pensions, interest or dividends on savings and investments before you start to pay Income Tax.  

The problem with freezing the Personal Allowance and the bandings where higher and additional rate tax applies, is that people have had pay rises and investment growth. This means more income is now crossing over into higher tax bands which is increasing tax revenue for the government even though they are strictly not increasing any tax here.  

You have to go back even further to 2009 when Barack Obama was confirmed as US President, Bitcoin was established and singer Michael Jackson died for the last time the Inheritance Tax Nil Rate Band Allowance was increased. The current rate continues to be £325,000. 

Think how much house prices and investments have increased since this point which is why so many more people are now having Inheritance Tax applied on their estate on death. 

 

Key Autumn Statement 2023 announcements from a financial planning point of view 

 

Pensions 

The State Pension triple lock continues meaning the new full State Pension rate will increase from £203.85 per week to £221.20 per week from April 2024.  

The triple lock guarantees to increase the State Pension each year by the higher of inflation, average earnings or 2.5%. This year average earnings have been the highest figure so that has been used.  

It was confirmed that the pension Lifetime Allowance will be abolished by April 2024. Previously it was announced that the tax charge was removed.  

It is likely that something will come in its place to restrict the amount of tax-free cash lump sum you can take. Similar to now where you can only receive a maximum of 25% of the previous Lifetime Allowance figure of £1,073,100. There could also be something to restrict tax free death benefits so watch this space.  

An interesting section of the statement was the idea of a ‘pension pot for life’. The government is going to look at ways of making it possible for people to choose their own pension pot when it comes to auto enrolment and receiving contributions from employers.  

Currently, it is the employer that sets up the pension and if you change jobs you will end up in a new scheme meaning over time you could end up with lots of smaller pots. This is a big problem as it is estimated that there is currently £27 billion in lost pensions. 

I suspect this will be too complicated to set up in the end and there will be kick back from employers who have already put a lot of time and effort into setting up auto enrolment.  

It doesn’t stop you creating your own ‘pot for life’ now though. You can still consolidate all your old pensions into one pot now and just leave your current workplace pension until you leave that company then transfer that to it too. Do seek professional advice though before you do transfer to ensure you don’t lose valuable benefits. 

 

ISAs 

A couple of small changes to ISAs.  

From April 2024 you will be able to subscribe to multiple ISAs of the same type in the same tax year. Not really a major benefit but could be handy if you are saving into one cash ISA and then find there is a better rate with another. 

The age at which children can apply for an adult cash ISA is changing from 18 down to 16. This is quite a big savings boost for a 16-year-old as previously they would have been limited to the Junior ISA allowance, currently £9,000 but can now get two further years at the full rate of £20,000.  

This is handy for parents who are gifting and saving for their children especially as adult cash ISAs can be transferred into stocks and shares ISAs from age 18. 

Unfortunately, the normal adult ISA allowances are all staying the same at £20,000 which again is really a sneaky tax increase as less of your money can be saved/invested tax free. 

 

EIS and VCTs 

As part of a deal with the European Union to limit state aid there is a sunset clause in place for Enterprise Investment Schemes (EIS) and Venture Capital Trusts (VCTs) meaning that this type of investment will lose its valuable tax benefits for new investments after 6th April 2025. 

This clause has now been extended to 2035. 

  

National Insurance 

The biggest benefit of the Autumn Statement was the reduction in National Insurance for employees with the main rate reducing from 12% to 10%. This change will start from January 2024 as the government is going to bring in emergency legislation. 

Self-employed workers will also see a reduction in their National Insurance contributions with the flat weekly rate, currently £3.45, being removed altogether and the rate on profits between £12,570 and £50,270 reducing from 9% to 8%.  

They will have to wait until April 2024 for these changes to kick in.  

It’s getting a bit messy with National Insurance and you might feel for all those payroll departments. It wasn’t long ago that National Insurance increased to 13.25% which we were told was to help the NHS tackle the backlog. Then that rise was reversed last November and now changed again. 

 

So overall no major changes needed to your financial planning just ensure you are on top of the current tax system and that you are making best uses of the allowances available to you.   

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