Investing & Performance | 23 November 2023

Autumn Statement 2023 – benefits for business owners, investors and savers

Business rate relief, multiple ISAs and National Insurance cuts – three of the biggest changes announced in the government’s Autumn Statement yesterday.

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Expectations were high when Chancellor Jeremy Hunt stood up in the House of Commons to deliver his Autumn Statement. Speculation was rife in the run-up to it, with reports of possible inheritance tax cuts and income tax reductions.

The rumour mill was wrong. There were no such announcements. But there were still some noteworthy changes from the Chancellor – designed to help businesses grow, workers keep more pay and savers get better use out of ISAs.

Business rate relief and ‘full expensing’ to back business growth

Businesses appeared to be among the biggest winners. The Chancellor announced that the government’s policy of ‘full expensing’ for firms would become permanent. This allows them to effectively deduct what they invest in capital assets, such as IT equipment, plant or machinery, from their taxable profits. The government’s calling this “the biggest business tax cut in modern British history”.

Mr Hunt also said the current business rate discount of 75% for eligible retail, leisure and hospitality firms – areas that suffered particularly harshly during the pandemic – would be extended to the 2024/25 tax year.

National Insurance contributions cut

There was also seemingly good news for…well…anyone who’s employed or self-employed. Although there were no income tax cuts, the government has reduced how much National Insurance people pay out of their salaries or profits.

Key points on this are:

For those employed, the main National Insurance rate will be reduced from 12% to 10% from 6 January next year, which will affect 27 million people
For the self-employed, ’Class 4’ National Insurance, paid on profits between £12,570 and £50,270, will be cut from 9% to 8% from next April
Also that month, ‘Class 2’ National Insurance, also paid by the self-employed earning over a certain amount, will be abolished completely

Coutts’ Wealth Planning Specialist Irene Wolstenholme says, “While the Autumn Statement wasn’t quite as significant on the tax front as some were expecting, the changes announced are good news for anyone who earns an income. And there’s a clear steer towards supporting businesses.”

She did add a word of caution though.

“People who have either received or will get pay rises in line with inflation will still pay more tax on their higher salaries as the tax thresholds remain frozen. And with inflation higher than it’s been for some time, that tax increase could dampen the benefit of paying less National Insurance for some.”

“People who have either received or will get pay rises in line with inflation will still pay more tax on their higher salaries as the tax thresholds remain frozen.”

Irene Wolstenholme, Coutts’ Wealth Planning Specialist

You can have multiple ISAs

And there was good news for those looking to save and potentially grow their money for the future. The government has made the system around ISAs – a tax-efficient way to save or invest your money – simpler.

Irene explains, “Until now, you could invest in a number of different ISAs in a tax year – cash, stocks and shares, lifetime, innovative finance – but only one of each type. But from next tax year, you’ll be able to open more than one of each type, with no limit to how many you could have.

“This means, for example, if you start a cash ISA without using your full ISA allowance, you could start another at a different interest rate if you were to later come into some extra money. Or invest that extra money through a stocks and shares ISA. You can use different providers, and it’s all done in a tax-efficient way.”

That tax efficiency comes from the fact that, if you put up to a certain amount into an ISA in any given tax year, any returns it makes are free from income and capital gains tax. The limit on how much you can put in remains unchanged – it’s £20,000 in 2023/24 and will remain that for 2024/25.

That limit applies across all your ISAs. So even though you can have several of them now, you can still only save up to £20,000 in total across all of them to get the tax benefit.

A quick reminder on the pension lifetime allowance

It’s worth remembering a pretty big pensions-related change announced by Mr Hunt in the Spring Budget back in March, which the government appears to be pressing ahead with.

The Chancellor said he was scrapping the lifetime allowance, the limit on how much someone can generally put aside in pension savings before they have to pay a lifetime allowance charge.

The charge on the lifetime allowance was reduced to 0% from April 2023 as a temporary measure while the government works through the legislation involved. But it has confirmed that the actual limit, £1,073,100, will be fully abolished from April 2024.

How has the Autumn Statement impacted investment markets?

There were no real surprises for investors in the Autumn Statement and markets were relatively unmoved by it. UK government bond yields were higher (prices fell) and sterling slightly lower in the hours following the Chancellor’s speech, amid concerns that inflation and interest rates could remain higher for longer, but they weren’t major shifts.

The Chancellor shared the Office for Budget Responsibility’s (OBR’s) latest forecast for the UK economy in his statement. The OBR now expects UK GDP to grow by 0.7% in 2024, down from its previous forecast of 1.8%. Again, this was no surprise to investors.

Lilian Chovin, Head of Asset Allocation at Coutts, says, “The government’s various moves to put money back in people’s pockets were no doubt partly made with an election next year in mind. But they do perhaps also demonstrate a changing trend for markets, with tax cuts having been ruled out until recently because of concerns it might cause inflationary pressures.

“It all shows that we appear to be entering a new regime, with inflation fast approaching levels that governments and central banks feel more comfortable with, having been much higher not long ago. This is something we’re seeing in many developed countries. It backs up the argument that interest rates have probably peaked, and that could be positive for both stock and bond markets.”

For help and guidance with your own financial plans for the future, please contact your private banker.

We're here to help, but please be aware that we cannot offer any tax advice. We recommend you contact an independent tax advisor to discuss your personal tax situation.

Tax reliefs referred to are those applying under current legislation which may change. The availability and value of any tax reliefs will depend on your individual circumstances.

The value of investments and the income from them can fall as well as rise and you may not get back what you put in. You should continue to hold cash for your short-term needs.