This year's Autumn Statement was as notable for what it didn’t include, as it was for what was announced. 

But looking ahead to 2024, a General Election year, what was included in Chancellor Jeremy Hunt’s plans, and what does it mean for your personal finances?

## Economic Forecast and Fiscal Targets

Hunt began with updates on the Office for Budget Responsibility's (OBR) economic forecasts, these broadly predict that:

- Economic growth for 2023 is expected to be +0.6% (up from a recessionary -0.2% previously). However, there was a downgrade in forecasted growth figures for 2024 and 2025 (to 0.7% and 1.4% respectively, reduced from 1.8% and 2.5%). 

- In October the UK’s headline inflation rate reduced to 4.6%, having fallen from a peak of 11.1% in October 2022. This means the government’s target to halve inflation from 10.1% in January this year has been achieved early. However, it's important to remember that this success should mainly be attributed to the Bank of England and its hiking of interest rates in the past two years. The Bank of England is operationally independent from the government.

- Debt and government borrowing figures are expected to fall below previous OBR forecasts. However, the Chancellor glossed over the fact that taxes are on an upward trend, and by 2028/29 are projected to reach their highest level (as a percentage of GDP) in the entire post-war period.


## Individual Taxes

The rabbit in the hat moment, and the main highlight for individual taxes, was a cut in the main rate of employee National Insurance (NI) from 12% to 10% starting January 6, 2024. 

By focusing NI instead of income tax, this saving only applies to workers with earned income, so pensioners and those with Buy to Let income will not share in the spoils.

Self-employed individuals will also see Class 2 NI abolished, whilst the main rate of Class 4 NI is being reduced from 9% to 8%. 

Crucially however, income tax thresholds remain frozen until 2028. 

So, whilst average incomes have gone up in recent years, largely driven by inflation, these thresholds have been held, meaning a pay cut in real terms for most, as more people are pushed into the higher tax brackets.

The additional rate of 45% tax, which has been paid on income above a threshold of £125,000 since the 2022 autumn statement (having previously been paid only on income above £150,000) remains unchanged.

## Pensions, Savings & Investments

State pensions will increase by 8.5% next year in line with average earnings. The state pension will therefore be £221 per week from April, in-line with the ‘triple lock’. 

The chancellor also proposed a consultation on the idea of a 'pension pot for life'. This could mean employers are legally obliged to pay pension contributions into an employee's existing pension. 

It will be interesting to see how this works in practice, but it could simplify things for many who build up an extensive collection of different pensions over their working lives.

There were no changes to pension tax relief, annual allowance thresholds or any other of the speculated alterations to the pensions regime. 

ISA allowances remain unchanged, but some alterations have been made to how the scheme works, including:

- The ability to buy some fractional shares.
- A change meaning investors can now Investing in more than one type of each ISA in a year (i.e. splitting the allowance several stocks and shares ISAs).
- Partial transfers of ISAs between providers are now also permitted.
- You will now have to be 18 to open a cash ISA - this means the ability to invest £9,000 into a Junior ISA and £20,000 into a cash ISA for 16 and 17 year olds is no longer possible.

Jeremy Hunt also mentioned a potential share offer of the government’s remaining Natwest shares, to the public, in the year ahead. These shares were obtained as part of the Government's bailout of Royal Bank of Scotland during the 2008 financial crisis.

## Looking beyond personal financial planning

There were also a raft of announcements that affected areas such as business taxes and reliefs as well as personal benefits, Universal Credit and the living wage.

Broadly speaking, benefits continue to rise in line with inflation, but access to benefits has become more strict for those out of work.

Meanwhile, businesses are better able to offset capital expenses against tax, alcohol duties have been frozen and new enterprise zones are being created as the Chancellor looked to deliver “an Autumn Statement for Growth” as well as push the UK to the forefront of the Artificial Intelligence (AI) revolution, through a £500m investment in the sector.

## What We Didn't See:

There were a number of speculated changes to tax rules, which were notable by their absence from the statement:

- No cuts to, or scrapping of, inheritance tax (IHT)
- As mentioned, no changes or reductions to income tax rates, or to income tax thresholds
- No substantive changes to permissible investments within ISAs, or the main £20,000 allowance. The ability to exit a Lifetime ISA with no penalty on the initial investment made was also not included.
- No substantive changes to pension rules, including the way tax relief works, the Lifetime Allowance, tax-free cash, the tapered annual allowance or the tax regime on death.

## How Have Markets Reacted to the Chancellor’s Autumn Statement?

Markets were relatively muted in reaction to the statement, with investor attention currently more focused on inflation data and the language coming out of the Bank of England, as they seek clues about where interest rates may go next.

## What does this mean for me and my personal financial planning?

Chancellor Hunt's Autumn Statement for 2023 paints a mixed picture for the UK's economic future - whilst the economy has narrowly avoided recession, growth in the coming years is expected to be anaemic whilst tax rates, debt and government borrowing remain historically high. 

Whilst there were no dramatic changes in the pensions, investments and tax landscape, our key takeaways are as follows:

- Stay nimble. Tax rules and pensions legislation are ever-changing and often unexpected. Keep your plan as flexible as possible by spreading risk across different tax wrappers, asset classes and geographies.

- Plan ahead. Being proactive and ensuring your plan reflects the ongoing changes in taxes, pensions, markets and your own situation will ensure you are best equipped to achieve your goals. Understanding how your decisions affect you, not only in the coming months, but several years and decades down the line, will lead you to better outcomes.

- Think tax-efficiently. Taxes in the UK are only seemingly heading in one direction - up, so it's more important than ever to ensure you don’t let your income and returns get eroded more than they should. Smart financial planning can minimise unwanted tax drags within the rules of the game, by use of the available allowances and exemptions.

- Spread your risk. Only true diversification across sectors and assets can reduce unnecessary risks in your portfolio. Whilst it can be tempting to get distracted by the noise around hot topics like AI, geopolitics and high inflation, a proper long-term plan will cut through the noise and give you the best chance of success, whilst keeping the ups and downs of markets at a level you are comfortable with. 

With the announcements made in this year’s Autumn Statement, the need for robust and proper planning is more important than ever. 
This will help you keep the tax drag on your pot to a minimum in a higher-tax world and ensure that your portfolio is better able to meet your goals - whether that be exiting your business, retirement, travelling the world, helping out your family and friends, or gifting to charity.
The tax environment remains ever-changing and highly complex, so if you have questions please contact your Nova Wealth partner to discuss how the Autumn statement affects you.
If you don’t currently work with us and would like to have a free initial consultation with one of our partners on your finances, including your own personalised Lifeline (a financial forecast built using Nova Wealth’s in-house modelling tool), you can book some time to [speak with us here](https://calendly.com/joe-checkley/catch-up-call?month=2023-11).



***Disclaimer:***

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*Any references to past performance should not be taken as a reliable indication of future returns. The value of an investment, and any income from it, can fall or rise. Fees and commissions may have not been expressly indicated, and you should take into account the effects that these have on the performance of a financial portfolio.*

*Nova Wealth is authorised and regulated by the Financial Conduct Authority.* 

Gain insights into the key highlights of Chancellor Jeremy Hunt's Autumn Statement 2023 and its impact on personal finances. Discover updates on economic forecasts, tax changes, pensions, and investments, and understand how these developments affect your financial planning in the UK's shifting economic landscape.

The Autumn Statement 2023 - What it means for your personal finances and how have markets reacted?

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