The UK’s 2023 Autumn Statement has unveiled a roadmap that will shape the economic landscape for the coming months.
At Abacus, we are a UK-centric firm with a large client base of British nationals who will be impacted – to varying degrees – by tax and legislation changes in the UK. As such, we recognise the importance of staying ahead of these changes to ensure optimal outcomes for our clients.
In this article, we’ll explore the key takeaways from the Autumn Statement and examine how they may impact your financial planning.
Economic Outlook:
Chancellor Jeremy Hunt set the stage by presenting a comprehensive overview of the country’s economic outlook.
The economic backdrop to the Autumn Statement was not as bad as many expected following the projections by the Office for Budget Responsibility (OBR) back in March 2023.
The OBR had initially forecast that the government would have borrowed £131.6 billion, but this number has since dropped by £16 billion after stronger than expected tax revenue.
The “higher for longer” narrative around inflation and interest rates has also triggered significant changes to the OBR economic projections, with the OBR now expecting inflation to cool to 2% by Q2 2025 (a year later than previously predicted).
Income Tax Changes:
The personal allowance will remain frozen at £12,570 and the higher rate threshold will also stay put at £50,270.
The blind person’s allowance will be increased to £3,070 for 2024/2025.
Also noteworthy is that the dividend allowance will be halved to £500. Although this had previously been announced, it is important to remember that this will come into effect from April 2024.
National Insurance Contributions & State Pension:
Though National Insurance was cut by 2% (from 12% to 10%) – which represents a significant tax cut for millions of people working in the UK – expats will be mostly unaffected, with the relevant class 2 and class 3 contributions remaining unchanged.
This is a particularly important note, as it relates to your eligibility for State Pension in retirement. For more on this, read our Expat’s Guide to State Pension here.
State Pension will also increase by 8.4% in April 2024, in line with triple lock provisions to ensure income received is protected from inflation.
Capital Gains Tax (CGT):
The annual CGT exemption will be halved to £3,000 for 2024/2025.
This had previously been announced, but its important to note that this will take effect from April 2024 (which could present some planning opportunities for disposals before the end of the 2023/2024 tax year).
Inheritance Tax (IHT):
Despite IHT dominating headlines in recent years (with IHT receipts received by Treasury continuing to reach new highs), and some speculation that Jeremy Hunt was considering cutting IHT from 40% – 20%, many were disappointed to see no mention of IHT in the Autumn Statement.
IHT will continue to be charged at 40%, applying to the part of the deceased’s estate not covered by the nil rate band.
The nil rate band will remain frozen at £325,000, which was a level first set in 2009/2010. With asset prices rising over time, many more estates are falling into the IHT net on death and it’s no surprise to see why IHT receipts are rising so significantly.
Property Taxes:
Stamp Duty Land Tax (SDLT) – the SDLT bands for residential property purchases will remain unchanged until April 2025.
However, at that point, the 0% band will be halved to £125,000 and a 2% rate will be charged between £125,000 – £250,000.
Annual Tax on Enveloped Dwellings (ATED) – the government continue to crack down on landlords/property investors, with the annual chargeable amounts for ATED increased by 6.7% for 2024/2025.
Individual Savings Accounts (ISAs)
ISAs were a big focus in the Autumn Statement, with a key objective being to simplify ISAs. A few key changes:
- The £20,000 limit remains frozen.
- However, savers will be able to make multiple ISA subscriptions into ISAs of the same type – such as Stocks & Shares ISAs – from April 2024. Currently, savers can only use one ISA in each category within a given tax year.
- The Innovative Finance ISA will be expanded to include long-term asset funds (LTAF).
LTAFs are a newer type of UK investment vehicle offering long-term investors access to a wide range of assets – such as private markets – which had previously only been accessible to a small minority of investors.
Part of the rationale here is to encourage more capital into new projects, which should in turn benefit the wider economy.
- The government will engage with ISA providers about permitting fractional shares, which is becoming increasingly popular amongst younger generations and savers/investors with lower amounts to invest.
- The minimum age to open an account will be harmonised at 18, removing the cash-only option for 16 and 17 year olds.
Conclusion:
In a financial landscape marked by change, maintaining flexibility and being able to adapt your Financial Plan is key to long term financial success and achieving financial freedom.
The Autumn Statement 2023 brings both challenges and opportunities, and at Abacus, we are committed to helping you navigate these shifts.
Our team of experts stand ready to craft personalised strategies that ensure your Financial Plan remains resilient and aligned with your unique goals. Contact us today to schedule a free consultation and embark on your journey to financial freedom in this ever-evolving landscape.
By Technical Team @ Abacus
Please keep in mind that, whilst we aim to update these articles periodically, the content could be subject to future rule changes. Always make sure to speak to a qualified professional to ensure you have the most up to date information and are taking regulated advice around your specific circumstances.