In his Autumn statement on 22 November Chancellor, Jeremy Hunt, announced 110 different measures which would “help grow the British economy”. Here are the key changes from his presentation to Parliament..
Key Personal Changes:
The headline change was a reduction in employee Class 1 National Insurance employee contributions from 12% to 10% from 6 January 2024. This rate will apply between the primary income threshold of £12,570 and the upper threshold of £50,270. Earnings above £50,270 will remain at 2%.
Self- employed National Insurance Class 4 contributions are also reduced from 9% to 8% from April next year with Class 2 contributions being abolished. It is estimated that around two million self-employed people will benefit and are expected to save on average £350 a year.
The State Pension “triple lock” will remain in place, allaying concerns that it could be amended to account for the high rates of inflation seen over the last few months. The end result is that the state pension will increase by 8.5% from April 2024. If you are entitled to a full state pension that equates to revised income of £221 per week or circa £11,490 per annum.
The Chancellor announced a pension consultation to give individuals a “pension pot for life”, saying that this will give savers a legal right to require an employer to pay contributions into their existing pension pot. We think that this would be a positive move from an employee point of view but a radical reform of the pension provider market is required to avoid an administrative problem for employers.
The Chancellor confirmed that the government will legislate in the Autumn Finance Bill 2023 to remove the lifetime allowance from April 2024. In his April 2023 budget, the government removed the lifetime allowance tax charge for benefits taken during the 2023/24 tax year. Before April 2023 the lifetime allowance restricted the tax efficient benefits which an individual could take from a pension scheme. At the time this was £1,073,100, although some individuals could benefit from a higher “protected” lifetime allowance.
Under current rules, if you die before age 75, your beneficiaries can inherit your Defined Contribution pension tax-free if under your lifetime allowance. It was proposed, contrary to previous announcements, that this benefit will continue. We await further detail on this and other matters.
The Chancellor resisted calls to introduce a “British ISA” with incentives to invest in UK based companies. However, he did confirm that from April 2024 the government will allow multiple subscriptions to ISA’s of the same type every year. Currently savers can only open one Cash ISA/Stocks & Shares ISA in a tax year. Unfortunately, the £20,000 per annum contribution limit remains.
Key Business Changes:
Full expensing: The investment tax relief which allows businesses to claim back 25p for every £1 invested in machinery and equipment will be made permanent.
Business rates: The 75% relief on rates for retail, hospitality and leisure will be extended to 2025. If you want any further information or advice on how these and other changes affect you, please don’t hesitate to get in touch with your adviser.