The Chancellor Jeremy Hunt’s Autumn Statement, which he delivered on Wednesday (22 November) cut several taxes, whilst also boosting support for people on low incomes. Here’s what it means for your money.
National insurance will be cut for 27 million people in January 2024, while the state pension is set to increase 8.5% as a result of the triple lock and Universal Credit will rise by 6.7% from April 2024. It comes after the Government had already announced that the National Living Wage will climb by almost 10% from April 2024.
While some of the measures are likely to put extra pounds in your pocket, they come after a series of significant tax hikes over the past two years. More hikes are in store for millions of households because income tax thresholds remain frozen. Public body the Office for Budget Responsibility says four million more people will be paying income tax by the 2028/29 financial year. Pensioners who work part-time are likely to be among this number from next April due to the state pension rise.
It comes as the UK is set to face a tough winter, with energy bills set to rise 5% in January 2024. Many households will find themselves paying more than they did last winter because Jeremy Hunt announced no new government support akin to last year’s £400 energy grant in his speech.
So, what are the key measures that were set out in the Autumn Statement – and how will they affect your finances? Here’s what we know.
National insurance cut
National insurance is a tax most working people over the age of 16 pay on their earnings in order to be eligible for certain state benefits – mainly the state pension. If you’re employed by a company, they will also have to pay national insurance.
The more years of national insurance contributions (NICs) you have under your belt, the more state pension you receive (up to a maximum of £203.85 a week – see more below).
Currently, you pay it if you earn above £242 a week (£12,584 a year). The rate currently sits at 12% on any earnings you get between this figure and £967 a week (£50,284). You then pay an extra 2% on anything you earn above the upper threshold. The figures are different if you’re self-employed (more below).
Under the Chancellor’s plans, from 6 January 2024 the main rate will be cut two percentage points to 10%. For people earning the average annual salary of roughly £35,000, it’ll mean you will pay £450 a year less in national insurance than you do now.
However, this is likely to mean more people will be dragged into paying the 40% rate of income tax, which applies to those earning more than £50,271 a year in England, Wales and Northern Ireland. This is because you will have more taxable income. The tax bands are different in Scotland, see the Scottish government website for more details.
There was also a major announcement for self-employed people. Those earning more than £12,570 a year will no longer have to pay the flat weekly rate of £3.45 as class 2 national insurance will be abolished from 1 April 2024. This equates to a saving of £192 a year. Meanwhile, class 4 payers will now pay a rate of 8% rather than 9% on any profits they make between £12,570 and £50,270 a year. Combined, the two measures equate to a £350 a year average saving, the government says.
National Living Wage increase
Announced in advance of Jeremy Hunt’s speech, the government has hiked the National Living Wage by 9.8% (£1.02) to £11.44 an hour. This will come into effect from 1 April 2024. The higher rate of the legal minimum will also be opened up to 21- and 22-year-olds, meaning they are in line for a 12.5% hike in their hourly rate.
Younger workers will also get double-digit increases for the National Minimum Wage, with the exact amounts depending on how old you are and whether you’re an apprentice. See our quick guide to find out exactly how the minimum wage will affect you.
State pension triple lock increase
Every year, the state pension goes up in line with whatever has the highest percentage out of:
- Inflation (September’s figure)
- Average wage growth
Pensioners received a 10.1% rise in the rate of the state pension in April 2023. The current full rate is £203.85 (£10,600) a year. It is now set to go up again from 1 April 2024, rising 8.5% (£17.35) in line with average wages to £221.20 a week (£11,502 a year).
However, there may be a sting in the tail for any pensioners getting the full rate who do part-time work. The new annual state pension figure means they will be just £1,000 a year under the income tax personal allowance of £12,570.
English, Welsh and Northern Irish pensioners exceeding this threshold will face a 20% tax bill on any earnings above it. The figure is 19% for pensioners in Scotland.
Universal Credit rise
From next April, people receiving Universal Credit and other benefits will get a 6.7% rise in what they receive. This figure is in line with September 2023’s inflation figure.
Jeremy Hunt said the increase would amount to an average real-terms increase of £470 a year for benefit claimants. But he did not announce a follow up to the additional cost of living payment households have been receiving over the course of 2023.
Local housing allowance unfrozen
Local housing allowance is a benefit that helps private renters who are on benefits to pay their rent. It has been frozen since 2020 but this has now been lifted.
The state support will now increase to 30% of local rents in the area the applicant lives in. Jeremy Hunt said this would put an extra £800 in the pockets of 1.6 million households next year.
Energy bill discounts if you live near new electricity infrastructure
With the UK moving towards using more electricity, for example by driving EVs, new electricity substations and pylons are likely to spring up across the country. The Chancellor announced a bit of a sweetener for people who’ll find themselves living close to these projects.
He said those living closest to this infrastructure may get up to £1,000 a year off their energy bills. However, the scheme has not yet been fully fleshed out, so we do not know any specifics.