In the wake of the Autumn Statement 2023, we delve into the insights unveiled. This year’s statement, delivered by Chancellor Jeremy Hunt, outlines a strategic roadmap for economic recovery and sustainability.
Summary of Spring Budget 2023
Chancellor Jeremy Hunt presented the Spring Budget on March on 15 March 2023, aiming to address the UK’s economic challenges, marked by weak growth and high inflation. Emphasising growth, Hunt outlined an industrial strategy focusing on enterprise, employment, education, and nationwide growth. Tax and spending announcements included childcare extensions, benefit reforms to incentivise work, energy price guarantees, increased defence spending, pension tax allowances, and a freeze on fuel duty. The Office for Budget Responsibility (OBR) revised forecasts, signaling positive albeit modest developments. The fiscal outlook was described as “somewhat brighter,” aligning with the revised fiscal targets approved by the House of Commons in February 2023.
What was expected in the Autumn Budget
Hunt was under pressure from backbench MPs to reduce personal tax rates, as his predecessor Kwasi Kwarteng promised last year. A reduction in the standard rate from 20p in the £1 to 19p was floated.
Personal allowances have been frozen since 2021, pushing more people into higher-rate tax bands. The freeze will push the overall tax rate to 37% of GDP by 2027, the OBR said in March, the highest since the Second World War. High wage rises this year in response to soaring inflation have increased the government’s tax receipts further.
Chancellor Jeremy Hunt was set to affirm the continuation of the state pension triple lock, ensuring pensions increase by either inflation, earnings growth, or 2.5%, whichever is highest. Based on the September total pay figure, a significant 8.5% rise in state pensions was anticipated. Speculation regarding a reduction in this uplift by excluding bonuses is expected to be dispelled, with Hunt maintaining the existing formula. In line with his Mansion House speech, Hunt was aiming to encourage UK pension funds to boost investments in British companies. Additionally, he planned to introduce “pot for life” reforms, allowing workers to nominate a pension scheme, addressing challenges tied to multiple retirement funds when changing jobs.
So here’s what happened and how it affects investments, mortgages, pensions, taxes and more.
Autumn Statement 2023: A Summary Relating to Tax and Pensions
In total, there were 110 measures to “help grow the economy”. Hunt says he has made difficult decisions, and instead of entering a recession, the UK economy has grown, but cautiously added that the work is not done.
Many income thresholds won’t rise with inflation for a good few years. And to square the numbers, the chancellor pencilled in some quite modest figures for departmental spending after the Budget.
Hunt says he will abolish the “Class 2” National Insurance charge for self-employed people earning more than £12,570. That will get rid of a flat rate compulsory charge of £3.45 a week. He says that will save the average self-employed person £192 a year. Meanwhile, self-employed people who pay “Class 4” National Insurance at 9% on all earnings between £12,570 and £50,270 will see that cut by 1 percentage point to 8% from April. “Taken together with the abolition of the compulsory Class 2 charge, these reforms will save around two million self-employed people an average of £350 a year from April,” says Hunt.
Employee National insurance will also be cut by 2 percentage points from 12% to 10% from 6 January. However, ahead of the autumn statement, the government had implemented tax increases equivalent to a 10% increase in national insurance.
Hunt has announced a widely anticipated decision to make permanent “full expensing” for businesses. For every £1 that a business invests in IT, machinery and equipment, they can claim back 25p in corporation tax. Companies can do this in one go as opposed to having to offset the cost against corporation tax over a longer period. It’s a big benefit for companies that invest heavily in equipment, such as manufacturers. But companies that aren’t profitable, or which mainly invest in people and equipment, won’t benefit as much.
The chancellor has also spoken about business rates, noting the government has already taken a third of properties through small business rate relief. Hunt says the government will freeze the small business multiplier for a further year. He adds he will extend the 75% discount on business rates up to £110,000 discount for retail hospitality and leisure businesses for another year as well. Hunt says these measures will save the average independent shop over £20,000 and the average independent pub over £12,800 next year.
Hunt says he will honour the government’s commitment to the pensions triple lock in full. He says from April 2024 the government will increase the full new state pension by 8.5% to £221.20 a week, worth up to £900 more a year. “That is one of the largest ever cash increases to the state pension – showing a Conservative government will always back our pensioners,” he says.
Workers will now have the right to require new employers to pay pension money into an existing pension pot.
On pension reforms, Hunt will consult on giving people one pension pot for life. He says he will consult on giving pension savers a “legal right to require a new employer to pay pension contributions into their existing pension”. He says these reforms could help unlock an “extra £1,000 a year in retirement for an average earner saving from 18”.
A word from Beesure
“As we navigate the details of the Autumn Budget 2023, our commitment remains unwavering to ensure the financial well-being of our clients. The measures announced reinforce our dedication to providing stability and adaptability in the ever-changing economic landscape. Your financial security is our priority, and we are here to guide you through these updates, offering reassurance and personalised strategies to safeguard your financial future.” – Matt Jackson DipFA, Director of Beesure
What happens next
The Office for Budget Responsibility (OBR) will publish updated economic forecasts and an assessment of the government’s finances for the next five years – running well beyond the next election.
If you would like to discuss how the Autumn Budget might affect your finances, please get in touch with your adviser. If you’d like some guidance in choosing the most suitable ways to save or invest your money to help you achieve your long-term financial goals, please get in touch.