Autumn Statement 2023: what it means for your money

Chancellor Jeremy Hunt hailed his fiscal plan as an 'Autumn Statement for growth', announcing various measures to support British workers and business.

Here, we take a closer look at what was included in the speech, and how it will affect your finances.

National Insurance cuts

In the run-up to the statement, Jeremy Hunt refused to bow to pressure from some Tory MPs to cut personal taxes, saying the government needed to focus on growing the economy and meeting its pledge to halve inflation by the end of year.

But based on the latest forecasts from the Office for Budget Responsibility (OBR) – which predicts inflation will fall to 2.8% by the end of 2024 – the Chancellor changed his tune and announced the following changes to National Insurance Contributions (NICs):

Class 1 employee NIC

The main rate of Class 1 employee NICs will be cut from 12% to 10% for workers earning over £12,570, benefitting 27 million people.

It means the average worker earning £35,400 will receive a tax cut of over £450 in the 2024-25 financial year.

The change will come into force from 6 January.

Self-employed NIC cuts

If you're self-employed, then you'll benefit from two measures announced by the Chancellor which will be brought in from April 2024.

• Class 2 contributions (currently a flat rate of £3.45 a week) will be abolished. It was meant to rise to £3.70 a week from April 2024. Mr Hunt says this will knock £192 off a self-employed worker's annual tax bill. 
• Class 4 rate will fall from 9% to 8% on profits over £12,570. 

The Chancellor says these cuts combined will mean an average self-employed person on £28,200 will save £350 in 2024-25. 

• Find out more:  National Insurance rates to be cut for millions of workers

Pension boost

Triple-lock protected

There were rumours the Treasury might tinker with the 'triple lock' – a protection that dates back to 2010 and guarantees state pensions will be boosted by either September’s inflation, earnings growth (from the period between May to July), or 2.5% – whichever is highest. 

But fears they would offer a lower earnings rate which excluded bonuses next year were dispelled by the Chancellor who confirmed they would rise by 8.5% from April 2024, in line with current wage growth figures.

• Find out more: Autumn Statement pension announcements explained

Single pension pot

The Chancellor announced he will 'consult' on reforms to allow people to choose their own pension scheme for automatic enrolment, rather than join their employer’s default arrangement.

Under current rules, UK companies are required to set up a pension scheme for employees. Unfortunately, this means many people will build up multiple pensions throughout their career, with a growing risk those pots become ‘lost’.

The government will now launch a 'call for evidence' on a new pension model that would simplify the current system and allow people to have one 'pension pot for life'. 

Living wage rise

The UK's National Living Wage will rise from £10.42 an hour to at least £11.44 an hour. Previously it only applied to workers aged 23 and over, but it will now apply to 21 and 22-year-olds for the first time. 

The wage was boosted by just under a pound in April 2023 and the new increase is expected to come into force in spring 2024. Hunt says it will benefit nearly two million workers.

The rise represents a 9.8% increase for over-23s on last year and a 12.4% jump for workers aged 22 and 21.

Alcohol duty frozen but smokers punished

Alcohol duties have been frozen until August 2024, following a radical overhaul of the way alcohol is taxed which took effect in the summer, while rates on hand-rolling tobacco products will increase by Retail Price Index (RPI) inflation plus 12% from 6pm today.

Other tobacco products will increase by RPI plus 2% from this evening but there were no changes to the 'sugar tax' (the Soft Drinks Industry Levy) which hasn't changed since April 2018.

These so-called 'sin taxes' are applied to products that are seen as harmful to consumers or costly to society, and are payable in addition to the standard rate VAT of 20%.

• Find out more: Changes to alcohol and tobacco duty explained

Benefits to rise but tougher sanctions coming

The Chancellor says benefits will be increased by 6.7%, in line with September’s inflation figure.

This applies to working-age benefits including means-tested benefits such as universal credit, and disability benefits.

Hunt also used his Autumn Statement speech to promise tougher sanctions for benefits claimants who refuse to take active steps to find work.

He announced that anyone who has still not found employment after seeking a job for 18 months will have to take part in a mandatory work placement. If they choose not to 'engage with the work search process' for six months, their benefits will be stopped.

It follows claims he made during the Tory conference that around 100,000 people are leaving the labour force every year for 'a life on benefits'. He added that people who won't look for work 'do not deserve the same benefits' as people who are trying hard to go back into employment. 

• Find out more: Autumn Statement benefit changes explained

Housing help for renters and homeowners

Housing benefit to help more renters

The pool of renters to receive housing benefit is to be widened from April, the Chancellor has confirmed.

The decision – which comes following repeated calls from ministers, councils and campaign groups – will see the Local Housing Allowance (LHA) threshold boosted. The government says this will give 1.6 million households an average of £800 of support next year. 

LHA sets the amount of money people renting from a private landlord can claim in housing benefit. The amount you can claim depends on the area you live in and the size of the property you rent.

It used to cover the cheapest half (50%) of the private renting market, before being cut to the lowest third (30%) in 2010. It was momentarily increased at the start of the pandemic but was again frozen at 2019-20 levels. In the years since, historic rent rises – which has seen the UK average reach £1,283 a month for new tenancies – means it no longer covers the cheapest third of the market in many places. 

In today's announcement, the Chancellor confirmed LHA will be unfrozen and again cover 30% of the market from April 2024.

• Find out more: what's happening to the cost of renting?

Speeding up the planning process

A significant overhaul of the planning system has been announced in order to get applications dealt with at a faster pace.

Reforms will also see local councils issue refunds on application fees for major developments if they take too long to make a decision on the application. Mr Hunt stressed there should be a 'prompt service, or your money back'.

The Chancellor also announced plans to speed up housing building and proposals to allow houses to be converted into two flats, as long as the exterior doesn't change. This will be implemented in 2024 following consultation early in the New Year.

• Find out more: should you buy a new-build home off-plan?

What other key changes were in the small print?

Not everything was included in the Autumn Statement speech – the full report included a whopping 110 measures after all. Here are some important changes the Chancellor didn't cover in the announcement:

Simplification of Isa rules

Savers will be able to pay into more than one of each type of Isa annually, as part of the biggest shake-up of Isa rules in recent years.

The change, coming into force from April 2024, will enable savers to easily move between different providers in search of higher returns, in a bid to encourage competition and boost rates. And those with innovative finance Isas will be able to invest tax-free in a broader range of investments from April.

• Find out more: Autumn Statement Isa changes explained

Extension to the 95% mortgage scheme

The mortgage guarantee scheme is designed to encourage lenders to offer low-deposit 95% mortgages.

It involves the government taking on some of the financial risks faced by banks that offer these deals, such as the cost of borrowers defaulting on their payments.

First-time buyers and home movers are eligible, with mortgages available on homes priced up to £600,000.

The scheme, which was first introduced in March 2021, was due to end in December but will now be extended for another 18 months to June 2025.

• Find out more: 95% mortgage guarantee scheme explained