How The Latest UK Tax Cuts Impact You

There’s been a range of tax cuts and changes to areas such as benefits and business accounting.

November 27, 2023
How The Latest UK Tax Cuts Impact You
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Jason Mountford

Written By

Jason Mountford

 

After weeks of speculation on what the UK chancellor Jeremy Hunt was going to announce in the 2023 Autumn Statement, we now have the full details. There’s been a range of tax cuts and changes to areas such as benefits and business accounting, and it could mean a little extra change in your pocket.

Much has been said in the media around the growth forecast from the Office of Budget Responsibility. In my view, it’s pointless discussing these, as they are simply forecasts. That is to say, they’re made up, best guess figures, and very little stock should be placed on them.

Instead of worrying about those hypotheticals, I’m going to cover some of the main announcements from the Autumn Statement, and explain exactly how it might impact you.

National Insurance Cut

National insurance (which, lets face it, is just another word for tax) has been reduced for both employees and the self-employed. For employees earning between £12,570 and £50,270 the rate of NI is set to decrease by 2 percentage points, dropping from 12 percent to 10 percent.

For someone earning £35,000 a year, that means an extra £450 in their wallet each year. The impact to self-employed people is even greater, with changes to both Class 2 and Class 4 NICs increasing take home pay of £35,000 by over £670.

Better Pension Choices

You might have missed this one in the coverage yesterday, but in my opinion it’s a big deal and a major win for consumers. Honestly, I can’t believe it hasn’t happened sooner. Going forward, UK workers will be able to ask their employer to pay into a specific pension of their choice.

That means no chasing up the 14 different pension schemes you had from part-time jobs during uni, and the option to keep a single personal pension throughout your whole working life.

Not only is this going to make pension admin much easier, but it will mean investors can choose their own pension scheme with low fees and the right investment choices, which could add up to hundreds of thousands of pounds extra by the time they reach retirement.

Pay Into Multiple ISAs

The rules around ISAs are being loosened as well. Up until now, investors have only been allowed to pay into one ISA of each type in a given year. So only one stocks and shares ISA and one cash ISA, for example.

That’s changing, meaning investors will now be able to contribute to multiple accounts in the same year. Not only that, but the underlying investment options are going to be improving too, with asset classes like private equity and real estate soon to be made available through changes to the investment legislation.

It means more investment choice and options, which can only be a good thing.

Minimum Wage and Benefits Increases

With inflation running rampant for the past couple of years, wages and benefits have been playing catch up. The Chancellor has announced a wide range of increases here, with the National Minimum Wage going up to £11.44 an hour from the current £10.42 per hour, Universal Credit and other benefits going up 6.7% and the State Pension increasing by 8.5%.

All of this will add real cash to the pockets of those who need it most, and will help those struggling deal with the rising cost of living.

The Bottom Line

All in all, there was a lot of change in this year's Autumn Statement, and with an election coming up in 2024 it’s clear the Conservative government is keen to get voters onside. Despite some of the more obvious vote grabbers, like the large increase to the State Pension and the cut to National Insurance, there are some policies of real value in the announcement.

In particular, the changes to the pension and ISA regulations are going to provide tangible improvements to the investment landscape for regular people, providing them with greater options and flexibility when it comes to managing their money.

Of course, the devil is in the detail, and it will be important to see the fine print and how the changes are to be implemented, before we can make a full assessment on their benefit. Regardless, they’re definitely some positive steps in the right direction.

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