Budget box

Autumn Statement November 2023

22 November 2023

Twice a year we listen to the Chancellor as they deliver their Statement or Budget, looking forward to how the finances of the UK will fare into the future based on current economic forecast, and to how any changes announced are expected to improve the UK's position. On many occasions, especially in the last few years, we have assumed that the Chancellor is stuck between a rock and a hard place when considering the accumulated debt mountain accrued during and after the pandemic. Public sector net debt is now running at about 97.8% of gross domestic product (GDP) (estimated as of end October 2023 – source: ONS) and remains at the highest level it has been since the early 1960s.

We are all only too aware of the effects of inflation on household finances over the last couple of years. We have started to see significant falls, most recently to 4.6% in October 2023 (Consumer Prices Index / CPI). Whilst this is of course welcome, it doesn't mean that prices are falling – just rising a little slower than before. To add to this, the Institute for Fiscal Studies (IFS) has noted that UK tax levels are at their highest since records began some 70 years ago, in significant part because of the freezing of personal tax thresholds put in place from April 2021.

These current tax measures have raised more tax than the government expected, which has given them a very small margin to make the changes noted below. The stakes are exceptionally high this time: the current government needs to win over voters before the next general election, which most expect to take place in the autumn of 2024, or perhaps earlier judging by the timing of one of the National Insurance changes to be passed by emergency legislation for early January 2024. Individuals, households and businesses will need to feel the financial effects of any changes well in advance of going to the polls, and with essentially no spare cash, it was interesting to observe the juggling act that the Chancellor undertook to try and achieve a feel-better (rather than feel-good) factor over the coming year.

So, what was announced in the Autumn Statement on 22 November 2023? Some of the headlines were as follows:

  • Some details had already been revealed prior to the Statement, such as the 9.8% increase to the minimum wage to £11.44 per hour from April 2024. This will also be extended to 21- and 22-year-olds for the first time.
  • The triple lock on the State Pension was honoured in full: the full new State Pension will increase by 8.5% in April 2024 to £221.20 a week.
  • The main rate of employee National Insurance Contributions (NICs) will be cut from 12% to 10% from 06 January 2024. This main rate of NICs applies to earnings between £12,570 and £50,270 gross pa.
  • NICs for self-employed individuals have also been cut, with Class 2 contributions abolished completely and Class 4 contributions cut from 9% to 8% from April 2024.
  • A consultation was announced on giving savers a legal right to require a new employer to pay pension contributions into their existing pension pot if they choose, to give one pension pot for life. There will also be consultation on consolidating workplace pension and local government pension funds.
  • An overhaul of the benefits system was also announced beforehand, with a particular focus on those with long-term health conditions or disabilities, and those facing long-term unemployment. As the chief executive of Citizens Advice has noted, there was more emphasis on the stick than on the carrot in these announcements.
  • However, it was announced that Universal Credit will increase by 6.7% from April 2024 in line with the September inflation figure.
  • The full capital expensing policy for businesses, due to expire in 2026, was made permanent. This allows companies to deduct 100% of spending on qualifying plant and machinery investment from profits, reducing their corporation tax liability.
  • A consultation was announced on allowing any house to be converted into two flats as long as the exterior remains unchanged.

As always, the devil will be in the detail, and as an example of this, there are some additional flexibility rule changes for ISAs, although no increases in the overall allowances.

It was also interesting to see that after much speculation, there were no changes to the current inheritance tax regime.

If you would like to discuss your financial planning in the light of these announcements, then please do let us know.

No individual advice is provided during the course of this blog.

Keith Churchouse FPFS
CFP Chartered FCSI
Chartered Financial Planner

Chapters Financial Limited is authorised and regulated by the Financial Conduct Authority, number 402899.

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