Autumn Statement 2023: A statement for growth?
This article was written by Andrew Chastney and Hazel Bowen, and was originally published by Canaccord Genuity Wealth Management (CGWM). Please note that the measures announced may affect clients in Scotland differently to those in the rest of the UK.
This was always going to be a challenging balancing act for the government, with economic, fiscal and political influences all in play - the latter becoming ever more important as we draw closer to a General Election.
The news that the government has hit one of its three economic priorities for 2023, the halving of headline inflation, has arguably provided more flexibility for stimulating the economy. However, the Bank of England has made it clear that the inflation battle is yet to be won, and it is little over a year since we all witnessed what happens when financial markets lose confidence in government policy. While government finances are now in better shape than had been feared only a few months ago, the reality of its large budget deficit remains. This restricts scope for decisive action to reduce the burden of tax – a stated government objective.
What are the key announcements?
Within this challenging yet more positive background than could have been expected, below are a few of the key announcements that caught our eye. The headline announcements concerned National Insurance cuts and encouraging business investment:
- The main rate of Class 1 employee National Insurance (which impacts the majority of salaried workers) will be cut from 12% to 10%. Unusually, this is due to take place part way through a tax year – on 6 January
- There was also good news for the self-employed, with Class 2 National Insurance being abolished, saving those individuals £192 a year, and Class 4 contributions being reduced from 9% to 8%
- The ‘Triple Lock’ pension guarantee is being fully honoured, with the state pension set to increase by 8.5% from next April. Similarly, the National Living Wage is being increased by 9.8%, in line with inflation
- The Chancellor promised ‘110 measures to boost business growth’; while we have yet to count them all, one notable measure is making so-called ‘full expensing’ permanent, although the main corporation tax rate remains at 25%
- The government will consult on a ‘pot for life’ pension approach, whereby employers would be legally required to pay contributions into an existing pension scheme if the employee prefers this, rather than being forced to open a new pension plan, as is currently common. This has the potential to reduce the current complexity of accumulating pension schemes throughout one’s working life, though we will need to see how this will work in practice.
Though only mentioned in passing in the Chancellor’s speech, documents released later in the day provided further clarification on the abolition of the lifetime allowance (LTA) for pensions savings. We will expand on this in detail once we have digested the Autumn Finance Bill, which will provide more information and undoubtedly further draft legislation. If you would like to discuss these changes in the meantime, please get in touch.
What was not included?
The Autumn Statement was also noteworthy for what was not included, despite media speculation. For example, there was no mention of Inheritance Tax, as was widely predicted in reports beforehand. There were also no allusions made to any changes in the main rate of income tax, capital gains tax or personal allowances.
Perhaps this is a signal to wait for the Spring 2024 budget?
The Chancellor was in an upbeat mood, describing this as ‘an autumn statement for growth’. Encouraging business investment is clearly to be welcomed, but some of the measures included to encourage more people into work, such as the tougher requirements for those on benefits, may be seen to be more controversial.
As ever, the devil is in the detail, and we will need to wait for the full details of these changes, as well as outlines of how they will be implemented, before we can cast judgement. Therefore, unlike some commentators, we prefer to be cautious, and will provide further comment as appropriate over the coming weeks and months. We live in interesting, and fast-moving, times, and here at Canaccord Genuity Wealth Management, we are committed to keeping our clients informed and up to date.
Get in touch
The impact that these changes might have on you will depend on your individual circumstances and requirements. In a rapidly changing environment, taking personalised financial advice has never been more important. To discuss how you might be impacted, please contact your usual Adam & Company contact, or get in touch to arrange a complementary, no-obligation consultation.
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The information provided is not to be treated as specific advice. It has no regard for the specific investment objectives, financial situation or needs of any specific person or entity.
This is not a recommendation to invest or disinvest in any of the companies, themes or sectors mentioned. They are included for illustrative purposes only.
The information contained herein is based on materials and sources deemed to be reliable; however, Canaccord Genuity Wealth Management makes no representation or warranty, either express or implied, to the accuracy, completeness or reliability of this information. Canaccord is not liable for the content and accuracy of the opinions and information provided by external contributors. All stated opinions and estimates in this article are subject to change without notice and Canaccord Genuity Wealth Management is under no obligation to update the information.
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Investment involves risk and you may not get back what you invest. It’s not suitable for everyone.
Investment involves risk and is not suitable for everyone.