‘110 measures’ to grow the economy

Posted on: 7th Feb 2024

With the Office for Budget Responsibility (OBR) predicting modest UK economic growth of 0.7% this year and 1.4% in 2025, during the Autumn Statement Chancellor Jeremy Hunt outlined 110 growth measures intended to get more people into work, cut business taxes and raise business investment, to get the economy “back on track.”

Contrary to speculation before the fiscal event, reforms to Inheritance Tax (IHT) or Individual Savings Accounts (ISAs) allowances were not announced, although some changes are proposed, including the ability for people to pay into multiple ISAs of the same type each tax year and permitting partial transfers of ISA funds between providers, from April 2024.

As a reminder:

  • Inheritance Tax bands remain at £325,000 nil-rate band, £175,000 residence nil-rate band, with taper starting at £2m – fixed at these levels
    until April 2028
  • The 2024/25 tax year ISA allowance remains at £20,000 and the JISA (Junior Individual Savings Account) allowance remains at £9,000.

Key business and personal taxation measures

A key business related measure was making the full expensing tax break for businesses permanent, while the headline personal taxation measure was the reduction in the main rate of Class 1 employee National Insurance contributions (NICs) from 12% to 10%. Providing a tax cut for 27 million working people, instead of taking effect on 6 April 2024, this took effect from 6 January 2024. The self-employed also benefited with Class 2 NICs paid by those earning more than £12,570 being abolished from April and Class 4 NICs paid on profits between £12,570 and £50,270, to be cut by one percentage point to 8% from April 2024.

Triple Lock honoured

The government’s commitment to the pensions Triple Lock was honoured, meaning that the basic State Pension, new State Pension and Pension Credit standard minimum guarantee will be uprated in April 2024 in line with average earnings growth of 8.5% (September 2023). The value of the new State Pension will increase in April 2024 from £203.85 per week to £221.20 per week, while the basic State Pension will rise from £156.20 to £169.50 per week.

Also on the pension front, the latest steps to deliver the Mansion House Reforms include a call for evidence on allowing individuals to consolidate pensions by having one pension pot for life.

The Lifetime Allowance (LTA) is still scheduled to be abolished from April 2024.

More good news…

A further growth measure addressed the future of Venture Capital Trusts (VCTs) and Enterprise Investment Scheme (EISs). The measure extended the operation of the EIS and VCT schemes from April 2025 to April 2035, continuing the availability of Income Tax and Capital Gains Tax reliefs for investors in qualifying companies and VCTs. Not all EISs and VCTs are regulated by the FCA

It is important to take professional advice before making any decision relating to your personal finances. Information within this newsletter is based on our current understanding of taxation and can be subject to change in future. It does not provide individual tailored investment advice and is for guidance only. Some rules may vary in different parts of the UK; please ask for details. We cannot assume legal liability for any errors or omissions it might contain. Levels and bases of, and reliefs from taxation are those currently applying or proposed and are subject to change; their value depends on the individual circumstances of the investor.

The value of investments can go down as well as up and you may not get back the full amount you invested. The past is not a guide to future performance and past performance may not necessarily be repeated. Changes in the rates of exchange may have an adverse effect on the value or price of an investment in sterling terms if it is denominated in a foreign currency.

Taxation depends on individual circumstances as well as tax law and HMRC practice which can change. The information contained within this newsletter is for information only purposes and does not constitute financial advice. The purpose of this newsletter is to provide technical and general guidance and should not be interpreted as a personal recommendation or advice.

The Financial Conduct Authority does not regulate advice on deposit accounts and some forms of tax advice.

All details are correct at time of writing – December 2023.

IN THE NEWS

Who wants to be an (ISA) millionaire?

The number of ISA millionaires – i.e. people who have built up a tax-free pot of £1m or more by investing in stocks and shares ISAs – has almost quintupled since 2017, with the figure now standing at 2,760 1. With the first ISAs introduced in 1999 aimed at encouraging more people to save, the data certainly suggests the objective is being satisfied for an increasing number, with the most recent data suggesting around 11.8 million adults were subscribed to an ISA in 2021/22, making £66.9bn deposits in that tax year.

More people choose living inheritances

There has been an increase in the number of people who are choosing to gift significant sums of money to beneficiaries whilst they are still alive –otherwise known as a ‘living inheritance.’ One in 10 respondents to the Great British Retirement Survey 20232 said they had given a living inheritance in the past three years. This increased to 15% amongst over-65s.

One million more over-65s still at work

There are now nearly a million more people over the age of 65 in the UK labour market compared with the number still at work in the year 20003. This is according to the Centre for Ageing Better, which has calculated that 976,000 workers over the age of 65 and 3.1 million aged 50-64 have been added to the workforce since the Millennium. It is thought that the UK’s ageing population, in addition to changes in the State Pension age, are mostly responsible for the increasing numbers of older workers in the UK’s labour force over the
past few decades.

1 HMRC, 2023
2 Interactive Investor, 2023
3 Centre for Ageing Better, 2023