After UK Chancellor of the Exchequer Jeremy Hunt presented his Autumn Statement to parliament this week, designed to boost growth and cut UK taxes, wealth managers discuss the impact.

With the Office for Budget Responsibility (OBR) downgrading its economic forecast, and with a general election due in 2024, UK Chancellor of the Exchequer Jeremy Hunt has announced a series of tax cuts, pension reforms and moves to boost business investment, in the Autumn Statement that included 110 measures to promote growth.

According to the OBR, the economy is now expected to grow by 0.6 per cent this year and 0.7 per cent in 2024, doubling to 1.4 per cent in 2025. Inflation is predicted to reach 2.8 per cent by the end of next year and 2 per cent by 2025.

In the Autumn Statement, Hunt maintained the pension triple lock in full, which means that the state pension will rise by 8.5 per cent next April. The government also plans to launch a consultation on ‘pot for life’ reforms which would give workers the right to nominate the pension scheme they want their employer to pay contributions into.

In addition, Hunt proposed cutting employees national insurance contributions from 12 to 10 per cent from January and abolishing Class 2 national insurance for the self-employed. A permanent tax break for businesses that allows them to save corporation tax by investing was also included in the Statement.    

Moreover, the government has announced that it is making some changes to individual savings accounts (ISAs). Starting from April next year, savers can have more than one of the same type of ISA. They can also transfer part of their savings between different providers during the year, without needing to reapply for an existing dormant account.

Additionally, Hunt has expanded the types of investments people can make. Innovative finance ISAs can now include long-term asset funds and open-ended property funds with extended notice periods. There is also a possibility that "certain fractional shares" will be eligible for ISA investment, pending further discussions on how to implement this policy. Meanwhile, the limits for different types of ISAs remain the same (£20,000 ($25,000) for cash and stocks and shares ISAs, £9,000 for a junior ISA, and £4,000 for the lifetime ISA). 

However, despite pressure to cut or even remove the controversial inheritance tax (IHT), this was not included in the package.

Here are reactions from wealth managers to the Autumn Statement.

Pension triple lock

Sian Steele, head of tax at professional services and wealth management firm Evelyn Partners  
“This will be very welcome to those receiving, or about to receive, the state pension at a time of rising living costs. The 8.5 per cent hike now nailed on for April means that the state pension will cost the Treasury £2 billion more in 2024/25 than the Office for Budget Responsibility forecast at the Spring Budget and that comes hot on the heels of this April’s bumper 10.1 per cent state pension hike, which added £11 billion to Government spending in 2023–24.

“From a tax point of view, this increase for the state pension takes it a step closer to the frozen annual personal income tax allowance, which means that a retiree will not need a great deal of private income in retirement – whether that is from a personal pension, investments or property – before they pay tax at the  basic rate of 20 per cent. The new flat rate annual state pension of £11,501 in the 2024/25 tax year, is just £1,069 short of the £12,570 tax-exempt allowance as it stands in 2023/24.”

Pot for Life

Idris Shaffiq, chartered financial planner at atomos’s Marlow office
“I can see the benefits of this for those clients who are actively advised, namely, through greater control over the investment solution and also a simplification of the masses of pension pots individuals accumulate in their working lives. However, there is a huge advice gap and, for those individuals who are not advised, this could lead to sub optimal outcomes as workplace schemes are usually low cost and individuals with no advice will struggle to navigate the numerous pension providers out there.”  

Richard Parkin, head of retirement at BNY Mellon Investment Management
“We welcome the Chancellor’s announcement to look at how we address the issue of small pots that has resulted from automatic enrolment, and to give individuals more choice over their pension provider. In principle, offering consumers a choice of their workplace pension provider and the chance for continuity seems sensible and provides the opportunity to have a clearer picture for retirement planning. However, we must recognise that many consumers are often ill equipped to make a choice of provider and there is a risk that they choose their pension provider based on the quality of marketing rather than the quality of the product.”

Alastair Black, head of savings policy at abrdn
“We welcome the government looking to consult on the legal right for employees to choose where their pension contributions should be paid. This should increase engagement and choice. It is important that the choice is genuine and employees will be able to make full use of this flexibility to consolidate their workplace pension savings with other long-term savings to support an efficient advice model.That said, the challenges in introducing this are likely to be substantial and risk creating extra work for all employers, including advice firms. If we go down this route, it is critical that the government consult on this to avoid increasing the burden on employers or raising costs of the pensions industry.”

Lifetime allowance

Faye Church, senior chartered financial planner, Investec Wealth & Investment
"Given the complex nature of pension rules, the delay of the removal of the Lifetime Allowance and beneficiary’s drawdown is not surprising. These rules are tricky to navigate at the best of times without looking at how this would work in practice and any decisions will continue to be delayed until April 2025. Care must be taken when making decisions that may affect anyone’s position in relation to the Lifetime Allowance and we would urge our clients to seek advice from their financial planner. We hope that April 2025 will bring some clarity to the rules, especially for those who can’t delay making decisions on taking benefits."

National Insurance reduction

Les Cameron, head of technical at M&G Wealth
“The reduction in National Insurance for both the self-employed and employed will be a welcome relief for many. Those who don't need the boost to their income might consider increasing their pension contributions or other savings to benefit them in the future. Importantly it shouldn't affect their state pension entitlement. The National Insurance cut will be welcomed by all employees earning over £12,570 per annum. It could have a knock-on effect for salary sacrifice arrangements though, as any National Insurance savings made by the employer will be lower and pension contributions will decrease."

Faye Church, senior chartered financial planner, Investec Wealth & Investment
"A cut in National Insurance from 12 per cent to 10 per cent will benefit lower and middle earners giving a much needed boost to take home pay. The current system takes 12 per cent of annual earnings between £12,570 and £50,270, so someone earning an average salary of £35,000 would save £350 a year. For someone earning £80,000 a year, they stand to save £754 a year. Help for the self-employed by abolishing Class 2 National Insurance Contributions will save £192 per year, and a reduction in Class 4 National Insurance Contributions from 9 per cent to 8 per cent will save around two million self-employed £350 from April 2024."

St James’s Place head of economic research Hetal Mehta
“The Chancellor had a final flourish in the form of the National Insurance tax cuts, effective from January. He has used up all the fiscal headroom made available from higher tax receipts – the election campaigning has surely begun. The OBR’s estimates of potential growth (at 1.6 per cent) continue to be much stronger than those of the Bank of England and there is a risk that growth disappointment will impair the public finances materially. With 2024 GDP growth set to be much weaker than initially forecast and interest rates still high – the risk of downside surprises is high – the scope for any more giveaways in the coming year now seems limited.” 

ISAs

Les Cameron, head of technical at M&G Wealth
"Confirmation of multiple subscriptions and partial transfers in the Autumn Statement document will be welcomed by ISA savers. It will improve flexibility of this popular tax wrapper and could be an important consideration for financial advisors who may wish to help clients make use of these new easements."

Founder and CEO of My Community Finance, Tobias Gruber
“For savers who have grappled with rising inflation this year, it’s a real shame that the government has not increased the ISA limit. However, from April next year, individuals will have the flexibility to subscribe to multiple ISAs of the same type, providing a tailored approach to their savings strategy. Additionally, the removal of the requirement to reapply for dormant accounts streamlines the process, ensuring that savers can effortlessly manage their existing accounts. To make the most of these changes, savers should proactively explore different savings options to find the best deals suited to their needs. Shopping around for competitive interest rates and exploring various savings options can maximise the benefits of their ISA limit.” 

Tarun Nagpal, CEO at S64 
“The inclusion of long-term asset funds (LTAFs) within the scope of Innovative Finance ISAs from April 2024, is another potential milestone in the widening of retail access to private markets. The changes will empower individuals to have the ability to invest for the long term and gain access to key diversifying and return-generating private assets as part of their overall portfolio allocation. This is the latest in a number of upcoming regulatory changes across Europe driving forward the democratisation of the alternatives industry, allowing private investors to also participate in the transition to a more sustainable economy.”

Inheritance Tax (IHT)

Tom Minnikin, partner at Forbes Dawson
“Jeremy Hunt has caved to the pressure, but this could potentially just be a delaying tactic. It would have been popular with many middle-income earners, who have been dragged into the inheritance tax net as a result of various allowances and thresholds being frozen. However, the decision not to press ahead with cuts to inheritance tax, which were widely mooted in the run-up to today’s statement, are probably more a reflection of the potential bad press that would have come from cutting a tax that benefits more wealthy voters during a cost-of-living crisis. Hunt will undoubtedly face calls from the opposition benches to ‘show his cards’ regarding whether this represents a change in policy, or simply a postponement until the March Budget. With an election expected next year, a cut in inheritance tax could be popular with some voters. However, there is a risk that it could alienate others – in key battlegrounds such as the red wall – who could see this as the Conservative Party favouring the rich.”

Rachael Griffin, tax and financial planning expert at Quilter
“There was a missed opportunity in addressing the complexities and inequities of the IHT system, notably the Residence Nil Rate Band (RNRB). The RNRB, while well-intentioned, is marked by its complexity and often excludes a significant demographic, particularly the rising number of childless elderly. As we look towards an ageing population with increasing childlessness, the RNRB's exclusionary nature becomes increasingly problematic. A more equitable and simplified IHT system involving raising the nil rate band to £500,000 would not only be fairer but more reflective of the changing demographics and societal structures of this country.”

VCT and EIS sunset clauses extended to April 2035

Andrew Dixon, head of wealth planning at SG Kleinwort Hambros
“As a passionate supporter of the venture space in the UK, it is pleasing to see the government focusing on innovation and, from a personal finance perspective, extending the sunset clause on Venture Capital Trusts and Enterprise Investment Schemes.”

Nicholas Hyett, investment manager at Wealth Club
“The announcement that the government is extending the VCT and EIS sunset clauses out to 2035 is good news for two schemes that have supported billions of pounds' worth of investment into UK startups. It removes uncertainty that has been lingering over the sector for some time, potentially putting off new entrants and new investors, and secures a crucial source of funding for the UK’s blossoming startup scene. It is a shame that the sunset clause hasn’t been abolished altogether – which would have avoided a repeat of the current uncertainty in a decade’s time – but with the Labour Party also voicing support or the schemes the extension is welcome nonetheless.”

Rupert West, managing director at Puma Private Equity
“We are delighted that in today’s [yesterday's] Autumn Statement, the Chancellor has confirmed that the Venture Capital Trust sunset clause has been extended to 2035. The VCT scheme provides crucial funding to British scale-up, high potential businesses and this news will provide much needed clarity both for those companies looking to grow and for investors considering investing this tax year.

"There continues to be huge demand for VCT investing. In the 2022/23 tax year, VCT fundraising surpassed the £1 billion milestone for the second time (£1.08 billion, according to the Association of Investment Companies). The scale-up companies that the scheme supports are the lifeblood of the UK economy and the VCT scheme enables them to grow, innovate and create vital employment opportunities. Today’s announcement means that investors can continue to use VCTs with confidence, and gain exposure to the growth of these innovative companies.”

Business and entrepreneurs

Marc Wright, head of entrepreneurs, Private Office, Investec Wealth & Investment (UK)  
“The Chancellor’s £20 billion tax relief/investment in business across the country is very welcome indeed and demonstrates that the government is focused on Backing British Business. The Chancellor said last week that he wanted to deliver policies to promote growth and he has delivered on that. Entrepreneurs and business owners have been under considerable pressure over the past three years and SMEs have seen costs rising, and retail consumption falling, leading to a steep growth in insolvencies. The significant jump in corporation tax this year has taken the UK from very competitive versus OECD countries to ‘middle of the road’, and we would have liked to see a much more competitive landscape to do business in the UK by cutting corporation tax for all business. 

“Even though Jeremy Hunt did not amend corporation tax, we are very happy about the spread of directed measures supporting businesses such as reducing rates, improving access to apprentices, and assisting the self-employed. The permanent implementation of full expensing of investment is very welcome indeed and should promote growth and productivity into 2024 and beyond.”

Tracey Neuman, private client executive at Ocorian
“What is clear from the Autumn Statement is the UK government’s desire to increase economic growth, largely via business investment. The main announcement was to make full expensing permanent for business. When initially introduced it was only going to be available for three years. Very broadly, this allows a business to claim 100 per cent first-year allowance for expenditure on plant and machinery. There is also a 50 per cent first-year allowance for certain other categories of expenditure. This, combined with the UK corporation tax rates, gives UK companies one of the lowest effective rates of tax in Europe and, arguably, makes the UK a very attractive jurisdiction in which to establish and run a business.” 

Research and development (R&D) tax reliefs reform

Tom Minnikin, partner at Forbes Dawson
“It is a step in the right direction, but the government should focus attention on improving the operation of the scheme itself. The announcement of increased relief for loss making companies is good news. However, many SMEs report ‘nightmares’ in getting HMRC to process their claims. Our own experience is that claims that were once being processed within four to six weeks are taking four to six months. For many small startups, particularly in the tech sector, the availability of R&D tax credits is a lifeline for getting their business off the ground. It is no good increasing the incentives if businesses can’t access the cash quickly.”

Mark Littlewood, director general at free market think tank the Institute of Economic Affairs
“The Autumn statement is a step in the right direction towards lower taxes and economic growth, but not a leap. The introduction of permanent full expensing will encourage businesses to invest in buildings, structures and equipment. The 110 supply side reforms, encompassing benefits, financial services and planning, will help boost growth. Cuts to National Insurance return a substantial sum to the pockets of the average worker. Nonetheless, amidst the rhetoric about tax reductions, this government is presiding over one of the heaviest tax burdens in the past seven decades. The frozen income tax thresholds amount to a stealth tax increase of around £40 billion annually by some estimates. The Chancellor is essentially taking with one hand and giving back with another. 

“There was also shockingly little about reducing government spending. The splashing of taxpayer cash for frivolous purposes, such as the Hay Festival, is hardly fiscally responsible. The rapid increase in the minimum wage risks businesses cutting jobs and hours of some of the most vulnerable workers, including those with fewer skills and the young. There is far more work to be done to reduce the tax burden, decrease spending, cut red tape, and reform public services."