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What does the Autumn Statement 2023 mean for you?
On Wednesday 22nd November, Chancellor Jeremy Hunt announced a range of measures that will impact many people financially in various aspects of their lives. There has been a lot of speculation about the impact the changes may bring in the midst of a cost-of-living crisis which will naturally cause anxiety and concern.
In this blog, we will highlight what changes are being planned and how they may impact your personal and household finances. For more details about the various changes visit the government's website.
Personal Tax
National Insurance contributions for employed and self-employed have been cut.
- From 6th January 2024 employee National Insurance contributions will be cut by 2% (from 12% to 10%)
Example: someone on an average salary of £35,000 is likely to save £450 a year.
- From 6th April, Class 2 flat rate weekly contributions for self-employed people are being abolished.
- From 6th April, Class 4 contributions are reducing by 1%. Anyone self-employed earning between £12,570 and £50,270 contributions will be from 9% to 8%.
Example: currently self-employed people pay £3.45 a week if earnings for the year are above £12,570. This will cease. The Chancellor estimates the two cuts combined will mean an average self-employed person on £28,200 will save £350 in 2024-2025.
Find out how these tax changes will save you by using this online calculator: https://www.ft.com/content/1931de4e-d8d5-4eb4-ad1c-7d204b26d649
Lloyds Banking Group, in partnership with Mental Health UK, have information for self-employed people about how to improve your mental health: https://www.lloydsbank.com/business/resource-centre/business-guides/stronger-mind-stronger-business.html
National Living Wage (NLW)
The following changes to the minimum wage are taking place from 1st April 2024.
- NLW being raised for those over 23 years old from £10.42 per hour to £11.44
- NLW is being extended to those aged between 21-22 years old for the first time.
- NLW being raised for those aged between 18-20 years old from £7.49 to £8.60 an hour.
- NLW being raised for those aged under 18 from £5.28 to £6.40 an hour.
- Apprentices aged under 19, or over 19 in their first year of apprenticeships, their rate will increase from £5.28 to £6.40 an hour.
The almost 10% rise to the NLW, whilst positive for individuals, could place employers under increasing pressure due to the impact of increasing wage costs.
Welfare payments and benefits
From April 2024, working-age benefits, including means-tested benefits, such as Universal Credit (UC) and Personal Independence Payment (PIP) and Employment Support Allowance (ESA), will be increased by 6.7%, in line with September’s inflation figure.
Alongside various benefit increases, there will also be a range of tougher sanctions introduced for those who face prolonged unemployment.
- The government will begin tracking claimants’ attendance at job fairs and interviews organised by Jobcentres.
- The Government’s Restart scheme (12-month job search programme) will be extended to include people who have not found a job after 6 months on universal credit (previously 9 months).
- Anyone who has not found employment after seeking a job for 18 months will have to undertake a mandatory work placement.
- If a claimant is on an open-ended sanction for 6 months such as choosing not to engage in the search for employment, benefits will be stopped as will the free prescriptions and legal aid.
The sanctions above will not apply to those people who receive the health element of Universal Credit. Additionally, no one in the Limited Capability to Work Related Activity (LCWRA) or Limited Capability for Work (LCW) groups will face benefit sanctions.
Find out more: https://www.which.co.uk/news/article/autumn-statement-2023-benefits-changes-a6hip0R9S3zp
The benefits system can be complicated. You can find out more information about benefits for people with mental illness here.
Work Capability Assessments (WCA)
Changes to the WCA won’t be started until 2025 and will only affect new claims.
Some of the questions in the assessment will be changed to take into account whether the person can work from home. The Government stated that the pandemic gave rise to an increased number of work-from-home contracts and the questions will now reflect the greater flexibility.
Find out more: https://www.scope.org.uk/news-and-stories/how-the-2023-autumn-statement-will-affect-disabled-people/
Pensions
To tackle multiple pension pots for those who have numerous pensions in various different schemes when changing jobs. Hunt has introduced various reforms to move towards people being able to have a pension "pot for life." Pension savers will be given the legal right to ask their employer to pay into a retirement fund of their choice, as opposed to automatic enrollment into their employer’s choice.
The state pension will rise in line with whichever is highest: average earnings growth, inflation or 2.5% (referred to as the triple lock).
From April 2024, it will go up by 8.5% in line with pay increases (including bonuses).
Example: £221.20 a week for the full, new flat-rate state pension (for those who reached state pension age after April 2016). £169.50 a week for the full, old basic state pension (for those who reached state pension age before April 2016).
To find out more about the concept of a pension pot for life, visit: https://ifamagazine.com/hunts-autumn-statement-announcements-financial-services-experts-react-to-measures/
Housing Support
Local Housing Allowance (LHA), used to calculate housing benefit for tenants renting from private landlords has been frozen since 2020 despite rising rents. The allowance will now be worth 30% of local market rents. The government is planning to unfreeze the allowance to help families with the cost of living. The rise is anticipated to deliver an increase of £800 for 1.6 million households.
Find out more information about how the Autumn Statement addresses housing-related needs: https://www.insidehousing.co.uk/insight/autumn-statement-2023-key-takeaways-for-the-sector-84033
Being in the right housing can have a big impact on your mental health. Rethink Mental Illness has information about housing options for people with mental illness here: https://www.rethink.org/advice-and-information/living-with-mental-illness/treatment-and-support/housing-options-for-adults-living-with-mental-illness/
Mortgages
The mortgage guarantee scheme was first introduced in March 2021, designed to encourage lenders to offer low-deposit mortgages, this has now been extended to June 2025. First-time buyers and home movers are eligible, with mortgages available on homes priced up to £600,000.
Find out more: https://www.which.co.uk/money/mortgages-and-property/mortgages/getting-a-mortgage/95-mortgage-guarantee-scheme-aUHVP7a8Mfbm
Often, people buying houses choose to purchase insurance at the same time. You can find out more information about insurance for people living with mental illness here.
Cost of living payments
Nothing was mentioned about the future of cost of living payments. Aside from a payment for pensioners this winter and one for those with low incomes on benefits in the spring, there appears to be no decision on the future financial support to support people during this crisis.
Laura Peters, Head of Mental Health and Money Advice commented:
“Many of our clients are struggling to heat their homes and put food on the table with benefits at their current level so we’re pleased to see them increasing. However, with costs continuing to rise, whether or not the increase means that people with mental illnesses who are receiving benefits will finally have enough money to live on remains to be seen.”