Yahoo Finance What the autumn statement means for your finances
There was something for everyone in the autumn statement, as Jeremy Hunt covered all the bases – from pension rises to tax cuts, but what does it all mean for you?
National insurance cut
The big announcement was saved for last – a 2 percentage point cut to Class 1 national insurance rates, which will be introduced from 6 January. This will apply to the 12% rate that is taken of anything you earn between £12,570 and £50,270, and will make a real difference to the money in your pocket. It will cut £149 off the tax bill of someone earning £20,000, provide a £349 cut for someone making £30,000, £549 for someone making £40,000, and £749 for someone making £50,000. This is in addition to separate cuts to National Insurance for self-employed people. However, it’s worth noting that by keeping NI and income tax thresholds frozen, the Treasury has done nothing to protect us from the misery of fiscal drag, which has dragged 2.2 million people into the tax regime since tax thresholds were first frozen.
Read more: National insurance rate to be slashed by 2%, Jeremy Hunt announces
National living wage
The national living wage will rise to £11.44 an hour on 1 April 2024 – up almost 10% from £10.42. It’s the biggest ever rise in the National Living Wage – up £1,800 a year for a full-time worker. The age threshold for the National Living Wage has also been cut from 23 to 21. This will be a welcome boost for anyone on the National Living wage – and a step change for 21-year- olds and 22-year-olds, who qualify for it for the first time. It will make a real difference to their financial resilience.
State pension rise
The state pension will rise 8.5% in line with the triple lock in April, which will come as a major relief for state pensioners, who will have been concerned the government would pick a lower measure in order to cut their costs. The state pension is at the heart of people’s retirement incomes, so a lower increase could have been a bitter blow to pensioners who have been battling with the rising cost of living.
Read more: £26.6bn sitting in lost pension pots as FCA sets out new rules
New rules to make it easier to keep track of pensions
This sounds like it’s not going to make a massive difference to your life, but if you change jobs regularly, it could seriously boost your retirement income. At the moment, most people are automatically enrolled into a pension picked by their employer when they start a new job, and when they move employers, they leave the old pot behind. The trouble is that over our lifetimes we build up a huge number of pensions, and when we lose paperwork and move house, we lose track of them. This change will mean you can pick where your pension money goes – so take your pot with you. There will be less chance of losing track, and the hope that when you get to retirement, you can use every penny you’ve saved to improve your retirement.
Read more: Why the Autumn statement matters for your pensions
ISAs
The chancellor has taken the opportunity to pay some much-needed attention to ISAs. Allowing multiple ISAs of the same kind in a single tax year from April, and partial transfers of ISAs opened in the current year are both sensible ways to inject much-needed flexibility and simplicity into the system.
It’s disappointing that Jeremy Hunt didn’t take the opportunity to increase the overall ISA allowance. This was last changed way back in 2017, so would need to rise to more than £25,000 just to keep pace with inflation.
Similarly, it’s disappointing that Hunt didn’t take the opportunity to make small tweaks to the LISA. It has already helped over 171,000 people onto the property ladder, and helped start saving and investing habits that will boost resilience for a lifetime, but it has the potential to do even more for homebuyers and retirees.
Read more: What is a lifetime ISA or LISA?
There are a couple of proposed changes to Innovative Finance ISAs, which will make a difference to some sophisticated investors. This includes expanding them to include Long Term Asset Funds – which include higher risk investments in areas like private equity. These have previously been hard to reach for retail investors, and until now they couldn’t be held within an ISA. IFISAs will also be extended to include open ended property funds – although closed ended funds are a better to invest in property, and these are already available through an ISA.
Alcohol duty has been frozen, but cigarette duty will rise
Jeremy Hunt announced a freeze on all alcohol duty until 1 August 2024. There had been fears of an RPI rise in alcohol duties in the Autumn Statement, which could have pushed up the price of a bottle of red wine to £8. The announcement of a freeze in duty will give drinkers something to cheer. Smokers, meanwhile, face the brunt of a tobacco duty rise of RPI plus 12%, which will kick in from 6pm this evening.
Watch: Jeremy Hunt has a dig at Rachel Reeves in the Autumn statement
