Yay, Boo, and What Can You Do?

This week was the exciting Autumn Statement. I’ve done a no wiffle-waffle summary on what was a YAY (hooray for Jeremy), what was a BOO (thumbs down for Jeremy) and then finally some tips on taxes, pensions, mortgages, inheritance tax and more – in the WHAT CAN YOU DO big bang finale (beat Jeremy! Just not literally please).

YAY – Hooray for Jeremy

1. Minimum wage up to £11.44 a week

2. The State Pension goes up next April by a decent amount

The biggest potential increase on the table has been confirmed. The State Pension will go up by 8.5%, so the full new State Pension will rise to £221 a week – that’s an increase of over £900 a year.

3. National Insurance (NI) cuts

There’s a 2% cut for employed folks, while Class 2 has been abolished and Class 4 lowered for the self-employed. The average PAYE earner on £35,000 a year will pay £450 less in National Insurance and a top taxpayer will pay about £750 less. The average self-employed worker will pay £350 less.

4. ISAs simplified(ish)

There was a little change in the small print. At the moment, you can open one of each type of ISA every tax year. Maybe one Cash one, and one Stocks & Shares one. But you can’t open more than one of the same type - for example, two Cash ISAs or two Stocks & Shares ISAs in the same tax year. This will change, so from next year you can have ISAs galore, as long as payments into all of them - of any flavour - don’t total more than £20,000 in any one tax year. Our ISA Hub will help explain how this all works today.

5. Potential workplace simplification with ‘A Pot for Life’

It's only a consultation BUT there is a plan afoot to change workplace pensions. So instead of our employers saying “Have this one”, we can say “I’d like this one” - if indeed you want to choose. So when we move jobs, we just give our new employer our pension details and we pay into that. It gives us control. Given that 1/3rd of workplace pensions have less than £5,000 in them, you see the point. I think this is (despite admin challenges) a good idea and will force providers to be clearer about what they do and how they stack up. Amusingly, if you take a photo of almost anyone in politics or pensions and amend the caption from ‘A Pot for Life’ to ‘Pot For Life’, you have hours of fun ahead, so I’m doubly in favour.

BOO – Thumbs down for Jeremy

1. Tax deckchairs - we’re paying more tax than ever is the hard truth

So before you get the trumpets out about lower NI, this is just rearranging fiscal deckchairs. Tax thresholds are in the deep freeze and with wages heading up as a result of inflation, the tax burden is the biggest it’s been since World War II. In 5 years’ time, tax is forecast to be nearly 38p of every earned £ in the UK.

2. Interest rates not going up is not the same as them coming down

The guv’nor of the Bank of England did an exercise in headmasterly expectation management this week, reminding the children that money Haribo will make us sick. So he will have to keep rates high for longer than we would like to stop us gobbling mortgages, holidays and generally buying stuff. We should assume mortgage rates will correspondingly stay higher for longer.

3. House prices will have a little slide - but very slowly come back

Transactions have fallen to their lowest level since the middle of the pandemic and are forecast to fall another 6.9% next year before picking up. House prices will probably show growth of about 1% this year, but could fall by an average of nearly 5% next year. Things are forecast to come back after this but recovery will be gradual.

4. Inheritance Tax is filling the coffers more than ever

Recent HMRC figures indicate that total receipts for the year are expected to be around £7.6 billion. Far more people are paying this tax – and paying more of it. I wonder if this is a little bunny for a starring role in Jeremy’s next outing in Spring (aka Budget).

What can you do - Beat Jeremy!

1. Be tax cunning

Use your ISAs; remember your Savings Allowance on cash accounts will get used up quicker with higher rates so Cash ISAs and Premium Bonds get more appealing; outside ISAs you don’t pay Capital Gains Tax on Government bonds so could these be a cash alternative, you can use pensions to reduce tax paid, and married couples should explore various tax wheezes - us living in sin can rot in naughty fiscal tut-tut hell :0)

2. Pension attention

Before any pension changes, maybe find out where your workplace pension is – and consider consolidating any old ones (not applicable if you have a final salary or defined benefit pension with ‘guarantees’ which you should generally treat with kid gloves); consider contributions to pensions especially if you are a higher or top rate taxpayer; get financial advice if you have slightly complex affairs – you can pay a one-off fee for a specific pension MOT with many advisers.

3. Mortgages – the 2024 Beast

Can you afford to overpay as you approach a remortgage, bringing down your monthly payments later? Do shop around for the best rates in advance and consider at least locking in an option in advance of committing, so you have some choices. Could you make a short-term switch to interest-only or maybe increase your mortgage term? Talk to your lender or a broker about these points to make sure you choose the best path for you.

4. Inheritance Tax – the one everyone hates

One of the most effective ways to cut this is to make gifts during your lifetime. [Hi, Mum and Dad. Have I told you how well you are both looking at the moment? Can’t wait to see you at Christmas x] You can make gifts of £3,000 a year, which fall out of your estate immediately for tax purposes. And you can give larger gifts [but only to Holly] that won’t be included in your estate if you live for another seven years [gin intake over Christmas will be strictly moderated, and there will be brisk walks after any Stilton consumption].

I hope that’s a helpful summary of some of the key takeouts. Have a lovely weekend everyone.

Holly

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