Are you better or worse off after the Autumn Statement? Chancellor Jeremy Hunt has announced a range of financial measures for the country, but he fell short in several key areas where it had been hoped he would act to boost the money in our pockets. Here are the announcement’s big pros and cons.
Pros
Minimum wage rise
The minimum wage will rise from £10.42 to £11.44 an hour from April 2024. It’s a pay rise of £1,856 a year for someone working full time on the minimum wage. The government estimates 2.7 million workers will benefit from the increase.
State pension boost
Retirees will receive an inflation-busting 8.5% state pension boost from April next year as the ‘triple-lock’ will be honoured. As a result, the ‘old’ state pension (paid to those who reached state pension age before 6 April 2016) will increase from £156.20 per week to £169.50 per week (£8,814 per year). The ‘new’ state pension will increase from £203.85 per week to £221.20 per week (£11,502.40 per year).
National insurance cut
The Chancellor has cut the main rate of National Insurance from 12% to 10%. It will save someone on £30,000 around £350 a year, according to analysis by investment platform AJ Bell. Anyone earning more than £50,270 will save the maximum of £754 a year.
ISAs
The two main ISA reforms announced in the Autumn Statement today, to be implemented in April 2024, will allow savers and investors to open multiple ISAs of the same type every year, as long as they stay within the £20,000 allowance, and the account opening age for adult ISAs has risen from age 16 to 18.
Other changes will allow partial transfers of ISA funds in-year between providers, remove the requirement to reapply for an existing dormant ISA, expand the Innovative Finance ISA to Long-Term Asset Funds (LTAFs) and open-ended property funds, and permit ‘certain fractional share contracts’ as eligible ISA investments.
Cons
Income tax allowances frozen
While the Chancellor cut National Insurance Contribution (NIC) rates for employees and the self-employed, he left income tax and NIC thresholds frozen until 2028. 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 (CPI) in September 2023 from the year before.
This means that the income tax personal allowance would have been £13,380, rather than £12,570, according to calculations by accountants RSM UK. Similarly, the higher rate threshold would have increased to £53,580, rather than the current amount of £50,270.
As it stands, as their wages increase, more people are being dragged into paying higher rates of income tax, cancelling out any gains from cuts to the National Insurance rate including pensioners who will receive the higher pensions. The personal allowance and higher-rate income tax threshold are due to remain frozen until 2028.
Analysis by wealth manager RBC Brewin Dolphin shows an individual who earned £50,000 in 2021, and whose income rises in line with actual and forecast CPI inflation, could see their income tax bill rise from £7,486 to £15,094 by 2028.
ISA limits frozen
An expected increase in the ISA allowance failed to materialise. This means the amount savers can put into an ISA will now stay the same at £20,000 a year, where it has been frozen since the 2017/18 tax year. The chancellor also failed to simplify ISAs as was widely expected.
Personal savings allowance frozen
No increase in the personal savings allowance was announced. Basic rate taxpayer can earn up to £1,000 a year in interest without having to pay any tax. For higher rate taxpayers it is £500. Additional rate taxpayers don’t receive any allowance at all. With interest rates currently high, many people will
No stamp duty holiday
No stamp duty holiday was announced for older home-movers who want to downsize but are put off by the cost. Supporters of the move say it would encourage older, single people to move into more suitable accommodation while freeing up larger, family homes for those who are moving up the ladder and want these types of properties in order to meet the needs of their families.
Conclusion
With a General Election on the cards in 2024, the Autumn Statement was clearly an attempt to win over voters’ hearts, minds and pockets. However, these increases will be funded from higher tax revenues caused by fiscal drag and there will still be plenty left over. According to the Office of Budget Responsibility (OBR), the long freeze on income tax thresholds will rake in £44.6bn per year by 2028-29, which is equivalent to a ten percentage-point rise in national insurance.
Photo from Canva
