National Insurance cuts and a State Pension boost: What the Autumn Statement means for your finances

National Insurance contributions cut to 10%; State pension set to increase by 8.5%

The ‘Autumn Statement for growth’, delivered yesterday by Chancellor Jeremy Hunt, set out a package expected to bring £20 billion of investment annually into the UK economy and promises to “level up communities, jobs and opportunities” across the country.

It comes at a time when the Government is under particular scrutiny, with a General Election looming in the not-too-distant future. Nevertheless, Hunt highlighted the Government’s recent success in meeting its pledge to halve inflation by the end of this year and made sure to preface the statement, saying he “will not take risks with inflation”.

Measures announced this time include cuts to National Insurance, boosts to benefits and the State Pension, as well as an increase to the National Living Wage.

A major talking point of this Autumn Statement, Hunt announced Employee National Insurance contributions (Class 1 National Insurance) will be cut to 10% as of 6 January 2024, down from 12% currently.

“This will help 27 million people,” said Hunt. “It means someone on the average salary of £35,000 will save over £450.”

However, some observers aren’t so sure of the perceived benefit to the average worker.

“Today’s move represents the starting klaxon for the Conservative party’s election campaign, and they are going to have to take some risks to help buoy their popularity,” said Shaun Moore, Tax and Financial Planning Expert at wealth management company, Quilter.

“This meagre boost in disposable income will grab headlines but only pays lip service to providing actual financial relief for individuals,” Moore added.

Meanwhile, additional National Insurance cuts for the self-employed were announced. On top of abolishing Class 2 National Insurance, Class 4 National Insurance will be cut by one percentage point to 8%.

Andy Chamberlain, Director of Policy at The Association of Independent Professionals and the Self-Employed, welcomed the news but said the “Government still has much more to do to win back the support of this sector” following a lack of support during the pandemic and the implementation of off-payroll working rules.

The Autumn Statement honoured the Government’s commitment to the triple lock, with plans to increase the state pension by 8.5% to £221.20 a week as of April 2024 – worth up to £900 more a year.

“That is one of the largest ever cash increases to the state pension – showing this Government will always back our pensioners,” said Hunt.

Furthermore, Hunt called for consultation on savers having a legal right to require a new employer to pay pension contributions into an existing pension pot, which would mean people can have one pension pot for life.

“Overall, this represents an extremely ambitious agenda, much of which simply can’t be implemented ahead of the General Election,” commented Steven Cameron, Pensions Director at Aegon – one of the largest providers of workplace pensions in the UK.

“We strongly encourage the Chancellor to take a phased and prioritised approach to implementation, rather than risking a chaotic attempt to implement so many radical changes all at once.”

While the amount that can be invested across various ISA products will remain frozen at £20,000 for the 24/25 tax year, the Government announced savers will be allowed to open and pay into several of the same type of ISA every year from April 2024.

This deviates from the current ISA allowance, which only permits savers to open and fund one of each of the main types of ISA each tax year.

In addition to this, partial transfer of ISA funds in-year between providers will be allowed from April 2024.

At present, partial transfers are only permitted for funds deposited in a previous tax year – balances paid in the current tax year must be moved as a whole.

A further change, only those aged 18 or over will be able to open an adult ISA from April 2024.

Junior ISAs (JISAs) remain available to those aged under 18. The annual limit on this type of savings account will also be frozen at its current level - £9,000 - for the next tax year.

A relief to many low-income workers, Hunt unveiled a 9.8% increase to the National Living Wage will take place from 1 April 2024. As a result, eligible workers across the UK, including those in the 21 to 22 age bracket, will be paid at least £11.44 an hour.

Young people and apprentices on National Minimum Wage will also see a boost to their earnings.

Recognising cost of living pressures continue to acutely affect ‘the poorest families’, the Government decided it will increase Universal Credit and other benefits by 6.7% in April 2024. This falls in line with inflation figures for September 2023 and, according to Hunt, will result in “an average increase of £470 for 5.5 million households next year”.

Hunt also confirmed all alcohol duty will be frozen until 1 August 2024 – inclusive of beer, cider, wine and spirits – after acknowledging that the cost of going to the pub had become more expensive for many people.

However, the duty rate on all tobacco products will see an increase of RPI + 2%, with the exception of hand-rolling tobacco. This rate will increase by RPI + 12% in an attempt to reduce the gap to cigarette duty.