Autumn Statement 2023

The following are the headlines we have taken from Chancellor Jeremy Hunt's announcement of 110 initiatives that may potentially raise investment into the UK by £20 billion, we will continue to absorb the full Autumn Statement.

Support for businesses and the self-employed

For businesses, the ‘full expensing’ tax break has been extended from 2026 to remain in place permanently. This allows companies who invest in new equipment such as IT and Machinery to claim back 100% of their money. This is great for certain industries such as manufacturing but less so for those who invest predominantly in people. It was described as the ‘largest tax cut in UK history’ and is set to cost £11 billion but the government feel this will attract further investment which coincides with the dubbed ‘Autumn Statement for growth’.

To help ‘simplify’ taxation for the self-employed, Class 2 National Insurance is set to be removed in full from April 2024 with Class 4, being reduced by 1% to 8%. This could be in response to the criticism received following the April budget which raised the Corporation Tax rate for businesses with profits over £250,000 from 19% to 25%.

Personal Pensions, Lifetime Allowance and State Pensions updates

The Chancellor announced to create a single pension pot for life, however, the finer mechanics around how will need to be outlined for this to become a reality, especially regarding the potential administration burden it could potentially cause employers, where historic changes in this area have typically further complicated what was already complex. This is a welcome step to increase visibility of retirement provision, overcome the legacy issue of lost pensions alongside scattered pots.

The abolition of the Lifetime Allowance (LTA) for pension savings is on schedule and official documents have confirmed it will be completed by 6 April 2024. The removal of the LTA, the maximum amount people can contribute to a pension pot without triggering tax charges, was announced in the spring Budget.

Documents released alongside the Autumn Statement speech said the government "will legislate in the Autumn Finance Bill 2023 to remove the Lifetime Allowance". The document added: "The measure will clarify the taxation of lump sums and lump sum death benefits, and the application of protections, as well as the tax treatment for overseas pensions, transitional arrangements, and reporting requirements. This will take effect from 6 April 2024."

This feeds into the commitment to uphold the triple lock guarantee for state pensions, which will result in an 8.5% increase, worth up to £900 more a year. A further increase to the minimum wage came as a welcome addition to £11.44 per hour.

Allowances remain frozen but multiple ISA subscriptions are permitted

Frozen allowances remain unchanged which could be considered controversial especially as inflationary increases were being encouraged by headlines prior to the Budget. The ISA allowance has remained frozen at £20,000, JISAs at £9,000 and LISA’s, which are structured to help first-time buyers get on the property ladder, allowance remains low at £4,000 despite the struggle for first-time buyers.

One significant change for ISAs is to allow multiple subscriptions to ISAs of the same type every year from April 2024 up to a maximum allowance of £20,000. Currently, savers can use only one ISA in each category within a tax year.

It is not possible to mix two different stocks and shares ISAs e.g., AJ Bell and Transact, and you’re also unable to have two cash ISAs from separate banks. Savers will be able to make partial transfers of funds between providers from April 2024.

Sunset clause extended for Enterprise Investment Schemes and Venture Capital Trusts

The good news is that the Chancellor confirmed within the accompanying documentation, support for Venture Capital Trusts (VCTs) and the Enterprise Investment Scheme (EIS) through the extension of the existing sunset clause for EIS and VCTs from April 2025 to April 2035.

If there had been no extension, the 30% income tax relief available on these products (including other tax benefits) would have stopped in April 2025.

National Insurance reduction and controlling inflation

There was a bold reduction in National Insurance for employees from 12% to 10% between earnings of £12,571- £50,271 which is set to impact 27 million employed individuals from the 6 January rather than the new tax year with an accelerated piece of legislation being implemented.

There has been some yo-yoing around National Insurance rates in recent Budgets with the hike to 13.25% in April last year and then being reversed in November 2022. Despite the announced cuts, National Insurance thresholds have remained static regardless of high inflation.

Controlling inflation was set out as a priority and it has been halved from 11.1% to 4.6% with a further decrease set to 2.8% in 2024. The Chancellor was very clear that he would not take the risk with inflation, but will this forecasted decrease have a notable impact on interest rates which appear to have levelled out more recently?

Final thoughts

The cumulative impact of the tax cuts announced will total a huge £10 billion. Despite the initial rumours concerning changes to Inheritance Tax rates, it remained untouched, but we could anticipate changes in the April Budget. This tax impacted around 4% of estates between 2020 and 2021 but due to high levels of inflation it will undoubtedly start to impact more as estates (in particular properties which are illiquid) start to creep past the current thresholds.

The argument that the nation is still exposed to a ‘stealth tax’ due to stagnant allowances is considerable. With recent reductions to the Capital Gains Allowance and other static allowances, in a high inflation environment makes fiscal drag more prominent and will result in a greater number of taxpayers over time. Hunt explicitly stated he will not take any risks with inflation and the frozen allowances could be a strategy to try and avoid further inflationary demands.

There may be a focus on savers in the April Budget, with inflationary increases to allowances for tax efficient wrappers but will savers, in particular younger generations, be given that much needed help they need to form the right financial foundations. Following their commitment to the triple lock guarantee over recent years a spotlight on the other end of the generational spectrum would be refreshing.

The information contained within this article is based on our understanding of legislation, whether proposed or in force, and market practice at the time of writing. Levels, bases and reliefs from taxation may be subject to change.