Chancellor Jeremy Hunt delivered his Autumn budget today. His key message was that the economy had turned a corner, the scourge of high inflation had been defeated and it was time to turn to growth.
This also meant that he could afford some giveaways after his government had been criticised for imposing the highest level of taxation the UK had ever seen.
So, what do the announcements made in the Autumn Statement mean for your personal finances?
Taxes
One of the Chancellor’s key announcements was a 2% cut to National Insurance for employed people, which falls from 12% to 10% on earnings from £12,576 to £50,268.
He also announced a 1% cut for the self-employed, which includes many associate dentists, supply teachers, GP partners and locum doctors, as well as scrapping an extra charge of £3.45 a week.
He said that was worth £450 a year to the average employed person and £350 to the average self-employed person.
There had been speculation of an announcement on Income Tax today, which is the Government’s biggest earner.
It is paid at 20% on earnings between £12,571 and £50,270 a year, at 40% on earnings between £50,271 and £125,140 a year, and at 45% on any earnings above £125,140.
In normal times, we’d expect those thresholds to go up every year in line with inflation, but they will remain frozen until 2028, in a move that means more people will move into the higher tax bands as their wages increase.
It’s possible there may be some better news to come in next year’s Spring Budget.
Savings & investments
Another important announcement in today’s speech was a relaxing of the rules around Individual Savings Account (ISAs); products that enable you to save and invest without paying any tax on the profits.
Previously, you were only allowed to open one of each type of ISA a year, but from April 2024 you will have the flexibility to open accounts with multiple ISA providers, to take advantage of any new deals that become available, and make limited transfers between ISAs.
But the maximum amount that can be put into ISAs every year was left unchanged at £20,000.
James Needham, Chief Product Officer at Wesleyan, said: “The ISA reforms announced by the Chancellor today are a positive step and we’d encourage any strategy that helps more people save and invest for the future.
“There’s no doubt that ISAs can be a productive savings and investment vehicle and the reforms announced today could certainly make them more attractive to more people, giving investors the opportunity to access better deals and making the ISA market more competitive.”
Pensions
The Chancellor took the more generous option when calculating the increase to the State Pension next April.
He pegged pensions to wage growth, which was 8.5%, after speculation he would chose to strip out bonuses and one-off payments, which would have reduced the increase to 7.8%.
Still, the uncertainty over the announcement highlights the importance of people making their own retirement plans in good time in order to ensure they can achieve the lifestyle that they aspire to.
At the same time, the consultation on a ‘pension pot for life' that all current and future employers can pay into will be a welcome simplification for many savers, helping give them more clarity about their retirement preparedness.
It’s very common for private sector workers to accumulate multiple retirement funds as they move between jobs, and this change would help ease some of the administrative burden this causes.
Business
Businesses including dental practices will welcome the Chancellor’s decision to extend the Full Expensing tax break that allows them to deduct investments in equipment and premises from their profits, so they pay less Corporation Tax.
This was due to expire in 2026 but has now been made permanent.
This will allow practices to plan their investments with more certainty, enabling them to broaden their range of services and capitalise on the opportunities that offering private cosmetic work can bring, for example.
Linda Wallace, Director of Wesleyan Financial Services at Wesleyan Group, the specialist financial provider, said: “As usual, the devil will be in the detail of today’s Autumn Statement.
“However, the cuts to National Insurance and the move to make full expensing permanent are both welcome news, in particular for many of our dentist customers.
“The idea of a ‘pension pot for life’ could have the potential to simplify and encourage saving for retirement, which is certainly something we’d encourage.”