The Autumn Statement on Wednesday 22nd November announced a few key changes, which we have summarised below:
State Pension
Prior to the announcement, we had been waiting for confirmation as to whether the Triple Lock guarantee would be retained for State Pensions. The guarantee sees the State Pension increase by the higher of inflation (measured by September’s CPI), the increase in average earnings (over the year to September), and 2.50%.
Over the year, the increase in earnings was the higher of the three, at 8.50%. The Chancellor is honouring the Triple Lock, so a full flat rate State Pension will rise to £221.18 pw (£11,501 pa) from April 2024. This is particularly interesting as the full rate is now nearing the tax-free Personal Allowance of £12,570, which has been frozen until April 2028. Many pensioners who previously haven’t incurred income tax could soon begin to face this as a result of the rising State Pension.
Pensions – Lifetime Allowance (LTA)
The Lifetime Allowance (LTA) is officially being rescinded, with this now written into legislation and due to take effect from 6th April 2024. Long-awaited clarification on some of the finer details has been provided:
• Tax-free cash will be limited to a lifetime amount of £268,275 (unless any protections apply). This will be known as the lump sum allowance (LSA).
• On death, a pension death benefit allowance will apply, which is the same as the previous LTA of £1,073,100 (assuming no protections apply).
o For any residual pension fund, if death occurred before age 75, beneficiaries will be able to draw from it entirely free of income tax.
o If death occurred after age 75, beneficiaries will be able to draw from the pension subject to income tax at their marginal rate.
• Protections will still be available to apply for, with a proposed deadline of 6th April 2025:
o Individual Protection 2016 (IP2016) – This maintains an LTA (now tax-free cash allowance) based on the value of your pension benefits at the point the LTA reduced in April 2016, if over £1 million at the time. IP2016 does not limit further pension contributions.
ISAs
• The ISA allowance will remain at £20,000 for the upcoming tax year.
• Individuals will now be able to contribute to multiple ISAs of the same type each tax year, up to the overall £20,000 limit. Previously, this was limited to contributions to one stocks and shares ISA, one cash ISA, and so on.
• The government will allow partial transfers of ISA funds between providers during the year, with effect from April 2024.
National Insurance
• For employed individuals, the rate of Class 1 National Insurance (NI) contributions will reduce from 12% to 10% (where income falls within the relevant bracket to be paying at this rate). This will take effect from 6th January 2024.
• For self-employed individuals, the rate of Class 4 NI on profits will reduce from 9% to 8%, taking effect from 6th April 2024.
• Class 2 NI will no longer be mandatory for the self-employed where profits are above £12,570. However, individuals will still retain their State Pension entitlement.
• The rates for Class 3 NI will remain at £17.45 pw (£907.40 for a full year) for 2024/25. This is relevant for individuals making voluntary NI contributions to increase their State Pension.
Other Points to Note
• No changes were made to inheritance tax, despite reports that this was being considered. The Office for Budget Responsibility (OBR) report estimates that inheritance tax receipts will grow to £9.8 bn in 2028/29.
• State Benefits are set to increase by CPI (6.70%) from April 2024, including Attendance Allowance.
• Whilst not included in the Autumn Statement, we have since received confirmation from Ofgem that the energy price cap will rise by 5% from January, up to an annual average of £1,928.
