The much-anticipated Chancellor’s Autumn Statement on Wednesday contained some good news for workers and measures that will help ISA savers and investors, but the overall effects on the UK economy remain to be seen.
Chancellor Jeremy Hunt announced he was cutting the rate of National Insurance from 12% to 10%. This will be effective from January and should save someone on an average salary around £450 per year.
The Chancellor also abolished ‘class 2’ NI for self-employed people earning more than £12,570 from April, with eight per cent to be paid on profits between £12,570 and £50,270 – a one per cent cut.
Personal Tax thresholds, ie how much you can earn before you pay tax, have been frozen at their current levels.
The Treasury says the average self-employed worker earning £28,200 a year will pay £350 less than they did this year.
The National Minimum Wage (or so-called National Living Wage) will rise to £11.44 an hour for those aged 21 and over, an increase of £1.26 for the 21-23 age group and a pound for the 23-plus group.
Under 18s will see their minimum rate rise from £5.28 to £6.40, as will apprentices, while those aged 18 to 20 will see a rise from £7.49 to £8.60.
This has, as you can imagine, already caused concern with many business owners – especially those in the hospitality sector, whose wage bills are set to increase. This could potentially add to a price increase for the customer.
As we have reported, the State Pension and Pension Credit will rise by 8.5% from April 2024.
Several pre-Statement ‘teasers’ did not materialise – many commentators thought the Inheritance Tax threshold might increase, but it didn’t and there was no change to Stamp Duty.
There were though changes to Individual Savings Accounts (ISAs), with people allowed to open and fund as many ISAs as they want from April 2024.
The annual tax-free allowance of £20,000 has not changed, but it does mean investors can split that amount annually between several different types of ISAs.
There are five kinds of ISA — cash ISAs, stocks and shares ISAs, Lifetime ISAs, innovative finance ISAs, and Junior ISAs or JISAs.
The changes mean you will be able to invest in more than one of any of these in a given tax year although for longer-term investors, the benefits of our discretionary managed option remain hard to beat in our view!
Additionally, you can move money invested in the current tax year if you want. Currently, you can only make transfers of funds invested in previous tax years.
The other change is that those aged 16 will no longer be able to open adult cash ISAs, and can only do so when they are 18.
It remains to be seen if the recent Autumn Statement will have a significant impact on the UK economy or the ‘cost of living crisis’.
The Chancellor has said inflation is expected to fall to 2.8% by the end of next year, though some analysts might argue measures such as a higher minimum wage will push up prices and hence inflation.
In the investment sector, various fund managers (as reported by Citywire) were mixed in their response, with comments ranging from ‘a budget for the masses’ to a budget ‘that will cause no ripples’ and one said ‘the market has been as if it hadn’t happened’.
Others though felt it painted a picture of a stable UK market and one that would be attractive to investors.
We shall wait and see but remain optimistic for the future!
