Wishful Thinking or Reality? Comparing our Wish List to Chancellor Hunt’s Autumn Statement

As the autumn leaves descended, so did the much-anticipated Autumn Statement from Chancellor Jeremy Hunt. Prior to the announcement, we created our own wish list of things that we believe would benefit our clients here at Fathom. Now that the statement has been delivered, it’s time to see if we got what we wanted.  

 

Pensions

In the realm of Pensions we would have liked to see the Chancellor encourage UK pension funds to increase their exposure to UK investments. With our Managing Director Mark Abley saying “I’d really like to see this mandated (not just encouraged) but I don’t think it will be.” There was guidance for local governments to implement ambitions for 10% allocation to private equity, in reality this has been happening for some time. There is also an intention to encourage defined benefit schemes to invest in productive finance “through a legislative framework for DB superfunds and new consolidation vehicles”  although the detail (as always with these things) remains opaque. So we got some of our wishes but not all of them. We think it’s a case of watching this space for further details. 

 

But here’s what he did announce:

 

Pension for Life

The Chancellor proposed a pension “pot for life” allowing employees to nominate where their workplace pension contributions are invested. This sounds like a good idea, giving employees control over how and where their pension contributions are invested. The government will now consult with the large workplace providers (note, not employers) to look at the implications and practicalities of such a move.  

 

In reality we´re not sure how this would work and could create an administrative nightmare for employers, (and) let’s face it the much lauded “pension dashboard” which would allow all employees one access point for their schemes is still no nearer to being implemented. It could be argued that for those employees so inclined it is relatively simple to consolidate their workplace pensions. The earliest we are likely to see any changes (if any) or implementation of this proposal is 2030 so it seems a little pointless really if the pensions dashboard is actually likely (ever) to get up and running.

 

State Pension Set to Increase by 8.5%

Jeremy Hunt has confirmed the government’s commitment to the Triple Lock, announcing an 8.5% boost to the State Pension in the coming year.

 

Inheritance Tax

There was a lot of speculation around what the Chancellor would and would not do with Inheritance Tax (including our own wishful speculation), in the end he did nothing!  The Nil Rate Tax Band and additional Residence Nil Rate Band will stay frozen at £325,000 and £175,000, respectively. I guess this could be one for the Spring Budget?

 

Income Tax

In our wish list we had hoped the Chancellor would raise Income Tax Thresholds, instead he opted to cut National Insurance which we would argue is the same thing. It was also interesting to hear the Chancellor acknowledge that the current combined (basic) rate of income tax and National Insurance at 32% is too high. This at least is a little bit of honesty, generally politicians of all stripes attempt to separate the two different taxes rather than acknowledge the reality that the basic rate of “income” tax is (was) 32%. 

 

National Insurance Contributions

The chancellor revealed a 2% reduction in National Insurance (highlighted above) for 27 million individuals on Wednesday. Currently, workers earning up to £50,270 pay 12% in national insurance, a rate that will now be lowered to 10%. This adjustment translates to savings of over £450 per year for someone earning the national average salary of £35,000.

 

For the self-employed, Mr. Hunt has eliminated class 2 National Insurance contributions, resulting in an annual savings of £192 for the average self-employed worker. Additionally, he reduced class 4 National Insurance contributions from 9% to 8%, leading to an average annual savings of £350 for self-employed individuals.

 

Corporation Tax

Last on our  list was our wish to see a reduction in Corporation Tax (by any amount), but unfortunately the Chancellor didn´t get our memo, in reality as one of the “grown-ups” brought in to replace (first) Kwasi Kwarteng and then Liz Truss (Rishi Sunak) it would be difficult politically to reverse the corporation tax rate, he did however look at other tax changes:

 

Extension of Tax Break for Business Investment

Mr. Hunt extended the temporary tax break known as “full expensing,” designed to allow businesses to offset any investments. Initially set to expire in 2026, the £11 billion per year tax break, effectively reducing corporations’ tax liability, will now be a permanent fixture.

 

ISAs

ISAs were not mentioned during the Autumn Statement, however there were some changes featured in documents accompanying Chancellor Jeremy Hunt’s statement to MPs. Included in the documents were some technical changes which will expand the investment universe of ISAs likely allowing investment into private equity, infrastructure and real estate and potentially fractional share ownership (although we ́re not really sure of the value of this) but crucially no additional allowance and no UK investment mandate. The government has announced plans to “simplify ISAs and provide more choice.” Starting from April 2024, savers will have the flexibility to invest into more than one ISA of a specific type within a single year. The rules currently restrict contributions to only one of each type of ISA in a given tax year so anyone inadvertently opening two ISA´s in the same tax year will not be penalised (a good thing!)

 

As you can see we didn’t get much from our wish list, just a little tinkering around the edges. As with all of these announcements it usually takes a few days for the details to begin to emerge but hopefully the above gives a useful summary of some of the changes If you wish to discuss anything covered in this article drop us an email at letstalk@fathomfinancial.co.uk or call us on 0800 043 8341. 

 

 

Please note

This guide is for information purposes and does not constitute financial advice, which should be based on your individual circumstances. The value of investments may go down as well as up and you may get back less than you invest. The favourable tax treatment of ISAs may be subject to changes in legislation in the future. Levels and bases of, and reliefs from taxation are subject to change and their value depends on the individual circumstances of the investor.