Autumn Statement 2023: What it means for your money

What you need to know about the Government’s latest spending and taxation plans.

With an election on the horizon, many saw this Autumn Statement (effectively a Budget in all but name) as a chance for the Conservative to try woo voters. There was speculation about tax cuts and changes to ISAs that might appeal.

Well, on Wednesday 22 November 2023 Chancellor Jeremy Hunt did announce some changes that could increase our take home pay – but there was plenty missing.

Here are those key changes, and what impact they could have on you and your money.

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Personal Tax

There were no changes to income tax rates or thresholds, with the focus instead on National Insurance which applies just to workers rather than other kinds of income.

National Insurance for employees reduced

The main rate of employee NI will be cut by 2% from Jan 6 2024 (earlier than these changes usually are), meaning you’ll be paying less of this “tax” from the new year.

It’ll drop from 12% of earnings between £12,570 and £50,270 to 10%. The government say someone with an average salary (£35,400) will save £450 a year. 27 million people will benefit.

In the Treasury documents released after the speech, the following examples were given for annual gains in 2024/25:

• someone on an average salary of £38,900 will receive an annual gain of over £520
• someone on an average salary of £44,300 will receive an annual gain of over £630
• someone on an average salary of £63,000 will receive over £750

However, with the Income Tax thresholds remaining frozen until 2028, increased earnings will mean more people fall victim to “fiscal drag” and pay higher rates of tax on some of their earnings. That will earn the government £45bn by 2029, while this NI change will only cost £10bn.

Class 2 National Insurance scrapped

This form of NI, paid by the self employed who earn over £12,570 a year, has been abolished. On current rates it’ll save £3.45 a week for almost 2 million people, adding up to £179.40 a year.

Importantly it won’t stop these workers from getting important National Insurance credits, vital for things like the State Pension.

However there is still a minimum level of earnings required to trigger this – currently £6,725 a year. If you earn less than this you’ll be able to make voluntary NI class 2 contributions (which will stay at £3.45 a week) to qualify for the NI contributory years.

By the way if you see quotes saying it’ll save people £192.40 a year – that’s a bit cheeky as it’s based on the rate increasing to £3.70 in April – which it now won’t.

Class 4 National Insurance reduced

Class 4 NI will be cut from 9% to 8% from April 2024. This is paid on profits over £12,570 a year up to £50,270 (above this is a lower 2% rate which isn’t changing). This will be worth around £160 a year on average.

Other tax

Inheritance Tax and Stamp Duty – nothing

Nothing was announced on Inheritance Tax or Stamp Duty – both which had been mooted in recent weeks.

Alcohol tax frozen

All alcohol duty is frozen until April 2024, so there won’t be any increase.

Tobacco tax increase from tonight

On the other hand, tobacco duty will go up by RPI inflation plus 2% from 6pm on 23 November 2023.

Savings

Help to Save to be reformed

Hidden in the documentation was news that Help To Save, which currently gives low earners 50% interest on savings will be reformed. We’ll add more when we have it.

No changes to tax on savings

Tax on savings is a big issue now thanks to the increase in interest rates. There was speculation we’d see new ISAs or a change to the Personal Savings Allowance. But these didn’t happen.

No changes to Lifetime ISAs

There was also hope of an increase to the Lifetime ISA property threshold (£450,000) and removal of early withdrawal penalties (25% if not for first property or retirement), but these too have been left untouched. More on LISAs here.

ISA admin changes

Though we didn’t see changes to ISA allowances, there are some simplications and clarifications to how we manage them that’ll begin in April 2024.

Probably the most useful is the ability to pay into more than one of the same type of ISA in a financial year. This will allow you to contribute a mix of easy access and fixed ISAs, even different length fixes – though only up to the £20,000 annual allowance.

You’ll also be able to to partial transfers between providers – meaning you don’t have to close down the old ISA if you want to move some but not all of your money.

ISAs only for over 18s

At the moment some Cash ISAs are available to those aged 16 and above. This will change so that 18 is the minimum age for all ISAs (apart from the Junior ISA). This doesn’t happen until April, so there’s time for 16 and 17 year olds with lots of cash to take advantage.

Fractional shares to be allowed in ISAs

One for investors. If you have any money held in fractional shares (where you buy part of a full share rather than a whole one) in your ISA, you might have been concerned by recent news that shared these weren’t officially allowed in ISAs – mainly because they didn’t exist when the ISA rules were drawn up.

The good new is you will now be allowed to hold these and you won’t lose your tax-free status. However, this will be one that goes for consultation so it might not come into play from April.

Wages

Minimum wage up

Though still well below the rate that would offer a true living wage (currently set at £12 outside London and £13.15 in London), there will be an increase from £10.42 an hour to £11.44. That’s worth £1,800 over a year if you’re a full time worker.

It’ll also be extended so that it applies to everyone over the age of 21 – the level only kicks in at 23 years old at the moment. This is worth even more a year – an extra £2,300.

Those between 18 and 20 will see an hourly rate hike to £8.60 (from £7.49)

Pensions

State Pension to increase with triple lock

Once again there has been constant speculation that these payments wouldn’t keep up with rising costs, but it was confirmed today that the State Pension will increase next April under the “triple lock”.

This means it’ll go up in April by 8.5% to £221.20 a week, which is inline with average wage growth, rather than September’s lower inflation rate of 6.9%. That’s an extra £902 a year.

Workplace pensions to be reviewed

The Chancellor also announces a plan to allow workers to have their workplace pension paid into an existing pension pot – ultimately leading to a single pension to manage (though people can still have more if they want).

Benefits

New strict measures to push people back to work

If job seekers haven’t found a job after 18 months they’ll be required to attend work placements for six months. If they refuse their benefits will be ended.

Benefits to increase with inflation

The benefits cap will also raise, this time by 6.7%. There were rumours it’d be a lower 4.6% (October’s rate). This is for things like Universal Credit and disability benefits and could be worth around £470 a year.

Support for renters

The Local Housing Allowance will also be increased to cover more households (roughly a third of renters), giving 1.6 million renters around £800 of support a year via Housing Benefit and the housing element of Universal Credit. This allowance had been frozen in 2020, which combined with fast rising rents made housing unaffordable for many.