As Chancellor Hunt reveals plans for the economy, for businesses and for consumers, experts from across the financial services sector have been sharing their reaction to the new policy plans. However, there were no pre-election give aways on income tax as bands remain frozen until 2027/28 despite rumours beforehand.
Measures which were announced include a 2% cut to NICs from January 6th 2024, with emergency legislation being followed tomorrow. There were also a packet of tax cuts for businesses.
In other announcements, there was significant news on pensions, with the Triple Lock maintained and also on the pension ‘pot for life’ something which has generated a lot of comment here on IFA Magazine
There was also an announcement Hunt has plans for a Nat West share flotation of the Government’s stake, to come in due course.
He also announced reforms to Self Employed taxation, abolishing class 2 NICs altogether saving self employed people £192 a year. People can still make voluntary payments. He also revealed that Class 4 NICs will be cut from 9% to 8% from April 2024 to help the self employed.
For the beleaguered property market, however there was little to cheer – but you can check out the reaction from Mortgage and Property professionals on IFA Magazine here.
Les Cameron, head of technical at M&G Wealth, said:
“The reduction in National Insurance for both the self-employed and employed will be a welcome relief for many. Those who don’t need the boost to their income might consider increasing their pension contributions or other savings to benefit them in the future. Importantly it shouldn’t affect their state pension entitlement.”
“The National Insurance cut will be welcomed by all employees earning over £12,570 per annum. It could have a knock-on effect for salary sacrifice arrangements though, as any National Insurance savings made by the employer will be lower and pension contributions will decrease.”
“Confirmation of multiple subscriptions and partial transfers in the Autumn Statement document will be welcomed by ISA savers. It will improve flexibility of this popular tax wrapper and could be an important consideration for financial advisers who may wish to help clients make use of these new easements.”
“It’s pleasing to see that, despite indications to the contrary in the draft legislation that, following consultation, income benefits for beneficiaries who receive them from a member who dies under the age 75 will remain tax-free.
“Previously, payments made to a trust from drawdown funds of those who die under the age of 75 were not tested against the Lifetime Allowance. Under the new regime they will be tested against the Lump Sum and Death Benefits Allowance. Further analysis will be required on the benefits of using trusts for those who die before their 75th birthday.”
“A number of other clarifications have been published today which will now take time to assess and consider.”
Linda Wallace, Director at Wesleyan Financial Services, said:
“The cut in National Insurance will be welcomed by many and help ease financial pressures at a time when the cost of living remains such a challenge. Those that were hoping for changes to the income tax rates, particularly doctors and others who find themselves falling into higher and additional rate tax bands, will be disappointed with today’s news.”
Caroline Miller, Partner & Head of Private Client at Wedlake Bell, said:
“Given its reputation as one of the most hated taxes in Britain, many will be surprised that Jeremy Hunt has declined to cut or abolish inheritance tax, a widely expected announcement that would not only have been popular with voters but would not cost the Exchequer too dearly (some £6 billion).
“It is possible that any inheritance tax cuts or reforms will instead be saved for the 2024 Spring Budget to make them more impactful in the run-up to the General Election, in which case, unless introduced immediately (which would be unusual but not unheard of), taxpayers are unlikely to benefit until there is time to implement the policies after the Election.
“If the Labour party win, they have made it clear they are not in favour of any sort of inheritance tax cut, so whether or not there will in, in reality, be any abolition or significant concessions in respect of inheritance tax remains very much up in the air.
“For many people and particularly businesses, while there are welcome measures in this speech, it will likely not address a feeling of instability and uncertainty surrounding tax policy as we approach the 2024 General Election. These feelings of uncertainties may cause many people, especially high net worth individuals, to potentially suspend decision-making on significant investments – for example purchasing property – as they evaluate what changes in tax and regulation a Labour government might bring.”
Ian Goodwin, Partner, Employment Tax, Mazars said:
“The National Living Wage (NLW) hike is overwhelmingly good news for employees. From April, those on the lowest pay will see more money in their pockets, and importantly from a younger age. And there is the added benefit of increased pension saving.
“For employers, the picture is more mixed. Against a challenging backdrop of increasing costs, from overheads to supply chains, higher pay packets could be the straw that breaks some businesses backs. Employers will need to navigate new NLW compliance, consider pay rises across their employee base and manage increased pension contributions. It will also be more expensive to recruit entry-level workers and for those that have salary sacrifice schemes in place, these will need to be managed carefully with employees, particularly where pay differentials are likely to decrease following today’s announcement .
“There is a risk that due to these increased costs and compliance burden, we’ll see an uptick in redundancies as employers struggle with staffing costs. To help minimise this risk, now is the time for employers to seek the advice and get on the front foot with robust governance in place.”
Toby Ryland, Corporate Tax Partner at accountancy firm HW Fisher, said:
“Businesses across the UK will be celebrating today – finally a simple tax policy from the Chancellor!
“Full Expensing is a straightforward and easy tax relief that will make the decision to invest in new equipment much easier. It covers a wide variety of business necessities, from IT infrastructure, office furniture, certain commercial vehicles, warehouse and construction equipment, and fixtures for non-residential properties.
“It means that tax deductions will follow the financial cost of investing in real time rather than spreading the cost over a longer period. It’s simple to administer too – companies can claim the relief through their Corporation Tax return.
“For example, if a business spends £100 on new tools and machinery, it will get a tax deduction for the full £100 immediately. Prior to the Full Expensing rules, the company would need to have claimed capital allowances on the £100, and while they would have still got the full tax relief, it would be over a much longer period of time, in this case, at a rate of 18% per year.
“Arguably a tactical and political decision ahead of 2024 elections, but a positive announcement nonetheless from the Chancellor. This will help to bolster UK business and bring back British entrepreneurial spirit. This is a step in the right direction to put the UK back on the map as a go-to destination to do business in.”
Simon Harrington, Head of Public Affairs at PIMFA, comments:
“We welcome the Government’s proposals to allow savers to hold multiple subscriptions in the same type of Individual Savings Account (ISA). However, more welcome would have been to allow savers to hold both a cash ISA and a Stocks and Shares ISA. Allowing partial transfers between ISAs and removing the need to reapply for an existing ISA annually are also sensible moves.
“Of more interest is the Government’s stated intention to permit certain fractional share contracts within ISAs. This could provide millions of mass market savers and investors to access high performing – albeit often expensive – shares in well-known companies as part of their portfolio.
“It is right that this area has been looked at by Government and clarified for firms wishing to engage in offering fractional shares to consumers. We consider this to be an extremely positive move and look forward to consulting with the Government on how this reform can be implemented.”
Andy Mielczarek, Founder and CEO of SmartSave, a Chetwood Financial company, said:
It was good that the Chancellor’s statement included a focus on the savings market. Modernising rules and regulations around savings products is a necessity as economic conditions change, so announcing reforms was a must after years of rampant inflation and a devastating cost-of-living crisis.
“The Chancellor’s wider emphasis on putting more money in people’s pockets through wage increases and tax cuts bodes well for people’s finances, but overlooking their ability to save effectively would have been a grave omission. With some saving providers offering inflation-beating rates, now is the time for action – not only by the government, but also by consumers, on whom the onus remains to make savvy financial decisions.
“Many banks are still failing to pass better rates onto customers, so it is up to savers to shop around for the best products and providers that can enable them to meet their long-term financial goals.”
The National Living Wage has been confirmed to rise to £11.44 per hour from April 2024, although this is positive for employees, how will this affect employers?
The legal experts at Weightmans have delved into the potential side effects the increase in National Living Wage could have on employers and SMEs across the UK.
What Does the National Living Wage Increase Mean for Employers?
- Long-term effects on business models – For many businesses that employ people on the national living wage, this is usually because the business model does not allow for staff to be paid more than that, therefore, even a small increase in the national living wage could disrupt business models and an organisation’s ability to hire new staff.
- Employers will invest more in technology and part-time workers – Businesses, particularly those in the retail and hospitality sector may focus on investing in technology, in the form of online platforms, in order to increase online sales. Furthermore, the long-term effects of this are that if e-commerce sales increase, physical stores may be forced to close and staff members may be out of jobs.
- Impact on bottom-line profitability – For many businesses across the UK, profit margins are currently tight, therefore, any small financial impact could have a large effect on an organisation. Due to the cost of living crisis, price increases to customers may not always be the best strategy and therefore employers will have to consider how they can lessen the impact the national living wage increase may have on them.
Andrew Forrest, Partner in the Employment, Pensions and Immigration team at Weightmans, said:
“The National Living Wage increase is a great step in terms of improving the lives of Britons during the cost of living crisis and re-energising the workforce. That being said, we must also consider the effects increasing the National Living Wage may have on small and medium-sized enterprises, as well as employers in general. With many organisations currently suffering economically, small financial changes can have a great impact on an SME, for example, increasing wages will decrease the overall profitability of an organisation, where profit margins may have been narrow to begin with. Furthermore, organisations may look to invest finances into technology and online platforms instead, which in turn could decrease the amount of staff they’d require. There may be many organisations that are not affected by the National Living Wage increase, however, as we approach 2024 organisations should put measures in place to prevent any potential impact”.
Rachael Griffin, tax and financial planning expert at Quilter sees it as a missed opportunity to simplify the ISA regime, commenting:
“The Chancellor’s newly unveiled plan to allow multiple subscriptions to ISAs of the same type every year from April 2024 is a step in the right direction for invigorating the savings culture in the UK. However, the real issue at hand is the complexity of the current ISA system.
“The multitude of ISA options available can be daunting for the average saver, potentially deterring them from saving altogether. A more streamlined approach, such as consolidating cash and stocks and shares ISAs into a single, more straightforward product, could significantly reduce this complexity. This unification would encourage a broader section of the population to engage with saving and investing, balancing the accessibility of cash savings with the growth potential of stock investments
“It’s about making saving and investing more accessible, understandable, and appealing to the average person.
“The Chancellor has also moved to align the age at which you can apply for an adult cash or stocks and shares ISA to 18. While this restricts 16 and 17 years old from applying for a cash ISA, it is a formality as they can still benefit from a junior ISAs with generous £9,000 annual limit. It then makes the multiple ISA subscriptions easier to implement.”
Steven Cameron, Pensions Director at Aegon, said:
“Chancellor Jeremy Hunt’s decision to cut National Insurance (NI) contributions will be welcomed by both employees and the self-employed. But doing this, rather than cut income tax rates, carries significant implications for both individuals and the state pension system. While the NI cuts directly benefits employees and the self-employed, unlike a cut in income tax rates it won’t benefit those over state pension age (currently 66), who are exempt from NI contributions.
“But NI cuts have the benefit of applying automatically across all of the UK, ensuring equal benefits for all regions such as Scotland. This is in contrast to cutting income tax, which is subject to devolved powers, so for example, would not have applied in Scotland unless the Scottish Government had followed suit.
“Furthermore, National Insurance contributions provide funding for essential benefits, including the state pension. Although this reduction in contributions will be welcomed by many, it could further strain the sustainability of the state pension due to an aging population and the triple lock mechanism leading to substantial pension increases. Without additional funding from general taxation, the affordability of the state pension may become increasingly challenging.
“A cut in income tax rates would have led to lower pensions tax relief, whereas cutting NI rates does not reduce the generosity of pensions tax relief.”
“Allowing individuals to save in more than one ISA of the same type per year removes one complexity from the ISA regime and will appeal to a wide group of savers and investors. It may also encourage employers to offer ISAs through the workplace, perhaps deducting regular contributions from payroll, without fearing employees with an existing ISA might inadvertently break the existing rules and end up contributing to more than one.
“However, it does come with the risk that some individuals will fail to self-certify that they remain within the £20,000 annual limit.
“It’s most likely to appeal to those who want to find the most competitive cash ISA rate to use up the remainder of their annual allowance. Ironically, this will do little to support the Chancellor’s growth agenda which relies on more investment in stocks and shares.”
Lindsay James, Investment Strategist at Quilter Investors, said:
“In recent budgets and fiscal events, when consulted, the Office for Budget Responsibility has been far more optimistic about the trajectory of the UK economy and inflation than the Bank of England. On inflation, today that has changed and it is now beginning to mirror the thoughts of the Central Bank. In March the OBR predicted inflation would be 0.9% by the end of 2024, yet today that forecast now stands at 2.8%. Inflation is not expected to hit the 2% target until 2025, and thus rates will likely stay ‘higher for longer’ even as economic growth stutters.
“However, the OBR continues to be a more optimistic voice compared to others on economic growth in the UK. Having avoided a technical recession to date, the forecasts now indicate sluggish growth, down from estimates in March, but growth nonetheless. But that optimism isn’t translating into strong expectations – growth forecasts have gone from 4.1% between 2023 and 2025 in the spring, to 2.7% today as growth deteriorates compared to what was expected. It is clear that interest rates are weighing on the wider economy and making up for these periods of lost growth will be difficult for the UK despite the government’s best intentions.
“This was billed as an ‘Autumn Statement for growth’ and the government is attempting to give the economy a shot in the arm. But it is questionable how effective and long lasting this growth will be. Making the ‘full expensing’ tax break for business permanent is a good first step and should provide some certainty to some companies when it comes to their own investment decision making. But where the government provides certainty with one hand, they remove it with another and we will see a long-term freeze in investment spending, all the while awaiting details on a long-term industrial and green strategy, where Labour has somewhat stolen a march on the narrative.
“With an election likely to be less than 12 months away, this Autumn Statement is much more political in nature, particularly given the economic gloom has not yet lifted from the UK. The giveaways announced today are somewhat of a gamble by the government given the state of play with price rises and economic growth. Inflation is still running at more than double the Bank of England’s target it could be there is even less headroom for giveaways in the Spring. As a result, today’s decisions are being driven much more by the polls than any fundamental improvement in the state of the UK’s long-term finances.”
Mohsin Rashid, CEO of ZIPZERO, said:
“All the National Insurance cuts in the world will still fall short of rebuilding the pile of rubble that millions of Britons’ finances have been left in after years of fiscal chaos.
“Hunt’s priorities are understandable – he has to paint a picture of long-term economic prosperity – but his focus was also misguided. It’s all very well for him to pat himself on the back for introducing policies that will put more money in people’s pockets in the long-term, and may eventually contribute to restoring economic stability (providing of course that they don’t spike inflation). But where is the relief that is so sorely needed by those still struggling to put clothes on their backs and food on the table?
“The cost-of-living crisis is far from over – bolstering immediate, short-term support like energy bill relief and cost-of-living payments was crucial but did not materialise. Meanwhile, it is plain to see that these cuts predominantly benefit those whose pockets are already well-lined. Time and time again, the people who truly need support – lower income households – are left to fend for themselves by Hunt’s wanting fiscal policies, while he turns a blind eye in the name of ‘growth’.”
Dean Butler, Managing Director for Retail Direct at Standard Life said:
“Reports that the headline rate of NI will be cut by 2% will no doubt be welcomed by workers who will hold on to more of their earnings as a result. It is workers who will benefit from this as those over state pension age do not pay NI.
“Unlike a change to income taxes, an NI cut would apply to the whole of the UK, as income tax rates are devolved in Scotland. The other difference from an income tax change is that it will not affect the level of tax relief that applies to people’s pension contributions.”
Shaun Moore, tax and financial planning expert at Quilter, said:
“Hunt has given workers a minuscule nibble of carrot with his 2p cut to National Insurance contributions after they’ve been battered by stick recently. The reality is workers are just £2.68 a week better off due to today’s tax ‘giveaway’ than they would have been had tax thresholds not been frozen.
“More money in people’s pockets thanks to tax cuts is no doubt a good thing but this move gives someone on the average salary of £32,963 an extra £8.60 a week due to the NI cut. But the reality is you only are getting a benefit of around 50% of this due to the frozen tax bands and fiscal drag. If we assume the tax bands had increased by 2% over the last four years, someone earning £34,963 should be a further £308.40 better off. Therefore, if you take this off today’s headline saving in tax it is actually only a saving of £139.46 over the year or a rather measly £2.68 a week.
“Hardly life enhancing even for those with budgets stretched to breaking point. The 2p cut for the 12% rate has the dual impact of making only a very minor difference to the amount of money people have while simultaneously risking the lower inflation figure we have been striving for. 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. This meagre boost in disposable income will grab headlines but only pays lip service to providing actual financial relief for individuals.
“National Insurance is a cornerstone of funding for crucial public services like the NHS and state benefits. Reducing NI contributions could inadvertently strain these vital services. Balancing individual financial relief with the sustainability of public services will be key in ensuring this change benefits the broader society.
“The abolition of Class 2 National Insurance credits by Hunt which saves self-employed people £192 a year, sends a message that the government is no longer seeing self-employed people in the same way as employed. Previously there has been a sense that the employed and self-employed should be treated the same. Under these new rules the self-employed get benefits for essentially taking more risk and as such get benefits like the state pension in return. This is therefore a marked change in policy.”
Clare Moffat, Pensions and Tax Expert, Royal London, said:
“We now have the confirmation that removal of the Lifetime allowance (LTA) will be going ahead in April 2024. We know the devil will be in the detail which we are expecting in the Finance Bill coming soon, and we hope to get clarification in how this will be implemented. Until we get this clarity making decisions and advising on LTA will remain challenging for advisers.”
Ultimately National Insurance is another tax to be paid, so any saving is a good one. While some will benefit from this reduction, we need to remember that leaving Personal Allowances and income tax thresholds frozen means some will end up paying tax when they weren’t before.
“While our research shows that the average household is paying nearly £500 a month more on household bills and food costs this year, a cut of 2% is a drop in the ocean. Any National Insurance reduction will only help those who are working and those under State Pension age.”
Sam Dewes, Private Client Partner at HW Fisher, said:
“The mission of today’s Statement was to ‘take decisions for the long term’ – the reality is, today’s Statement focused on short-term tactical changes. Today, it was all about the next election. This could be the Chancellor’s last Statement ahead of a potential new Government in the year ahead and it’s clear that today’s changes have been made with that firmly in mind.
“We have seen headline grabbing business tax changes announced, and businesses across the UK will be celebrating (with a pint thanks to alcohol duty freezes) following the decision to make full expensing made permanent for UK plc.
“It’s interesting to see no mention of Inheritance Tax – something the Chancellor might be keeping up his sleeve as part of a ‘last hurrah’ as we head into election year.”
Commenting on the various missed opportunities in today’s Autumn Statement, abrdn have highlighted two areas. The first is that there were no IHT changes announced commenting:
“The decision to leave inheritance tax (IHT) untouched is a missed opportunity to simplify what has become an increasingly complex tax. This is the era of the Great Wealth Transfer – with trillions of pounds set to be passed between estates in the coming decades. We need a system that encourages engagement, not dissuades it, so that people can plan ahead effectively.”
They also point out no measures to support social care commenting:
“We are also disappointed that no new measures have been announced on social care. This is a major issue that is only becoming more pressing by the day. It simply can’t afford to be kicked down the road. The social care cap has already been delayed until 2025, and will only apply to personal care – not the costs of things like food and lodgings for residential care. We need measures to help will help people – advised, or unadvised – to plan ahead with greater confidence. The current situation means many are at risk of being caught short amid rocketing care costs or having nothing put aside at all.”
Katharine Arthur, Partner & Head of Private Client, haysmacintyre, said:
“With the tax burden at its highest since WW2, today’s changes to National Insurance could come as a welcome relief to many. But while pleasing on the face of it, this headline tax cut may not be as generous as it appears.
“Over the past year, sky-high inflation has pushed many people into higher tax bands, meaning a number of personal taxes have repeatedly broken record levels. While the National Insurance cuts will somewhat lessen the burden for many individuals the actual annual saving is, in reality, minor when compared to the current tax burden on households.
“With the cut targeted at employees and the self-employed, there are also questions over how much this actually helps businesses. While it will mean slightly more money in people’s pockets, which should help the wider economy, employers will now need to cope with more complicated payrolls, applying the new rates before the start of the new tax year, and meeting the costs of the increased Living Wage.
“Ultimately, with the country’s finances remaining stretched has the Chancellor decided to bank some more generous cuts or changes for another day?”
James Carter, Head of Platform Product Policy, Fidelity International, comments:
“Most people will find themselves managing a series of evolving financial objectives over time. However, we know that many find it difficult to identify which products best suit their saving needs. This complexity destroys confidence, leaving many individuals missing out on vital opportunities to strengthen both their short and long-term financial position.
“The individual measures outlined by the Chancellor today are a step in the right direction, but they do not go far enough in creating a simplified product set which promotes confidence in investing, encouraging greater levels of financial engagement amongst consumers.
“We also strongly believe that products need to align with investors’ needs and behaviour, and today’s decision to enable investors to hold fractional shares within an ISA will be met with enthusiasm by many. Beyond this, we believe the Lifetime ISA (LISA) also needs to evolve to better address consumers’ needs – for example, by increasing the house price limit from £450,000 to £600,0000 and increasing the age limit on opening a LISA from 40 to 50. While this was not included in today’s announcement, we hope this forms part of the Treasury’s consultation on further reforms.”
Stewart Sanderson, Head of Private Clients at Brooks Macdonald, said:
“In stark contrast to last year, today’s Autumn Statement took place against a much more stable economic backdrop. Citing the fall of inflation down to 4.6% and better than expected GDP growth in 2023, the Chancellor confidently declared this was an Autumn Statement for a ‘country that had turned a corner’.
“Higher tax revenue boosted government funds, enabling the Chancellor to roll out a growth-oriented agenda. This is a budget that prioritises business-centric measures, including over 100 supply-side reforms, while also offering pre-election giveaways to savers and investors.
“Prior to today, Mr. Hunt said that he would “remove the barriers that stop businesses growing” and true to his word he delivered one of the most substantial tax cuts for business in recent times, making “full expensing capital allowance scheme” permanent. This £11 billion-a-year tax break should go some way to boosting business investment, economic growth, and the UK’s stagnant productivity.
“In a potential boost for UK industry, he announced a new ‘growth fund’ to be established within the British Business Bank to help get pension capital into high-growth start-ups. Despite his promise not to make any tax cuts that could lead to inflation, in a surprise move, Hunt reduced national insurance for 27 million people. However, it’s impact on inflation will likely be negligible given the 2022 freezing of tax rate thresholds which pushed many earners into higher tax brackets.
“Investors and savers will welcome a wide-ranging package of ISA reforms that simplify the system and encourage higher take up amongst younger people. The revamped regime includes the ability of individuals to contribute to multiple ISAs in the tax year without impacting their £20,000 allowance and will enable people to hold fractional shares within the tax wrapper.
“High interest rates still present a challenge for the economy and Hunt will hope to see Bank of England policy move in lockstep with his fiscal loosening, but yesterday Bailey cautioned that the market is underestimating inflation risks. For investors, the UK remains a difficult place to judge. While sentiment has improved in recent months, a downward revision to growth by the OBR and with inflation well above long-term targets, it’s not clear that we’re out of the woods just yet. The Chancellor believes we have turned a corner, but it’s still a long road ahead.”
David Gow, Director at Acumen Financial Planning, said:
“Pensioners will find themselves amongst the best-placed beneficiaries of today’s announcement, with the Chancellor confirming that the triple lock will be maintained and the state pension to see an increase of 8.5% in April. In further welcome news, the government’s commitment to consulting on giving people ‘one pension pot for life’ has the potential to be a game-changer in the pensions industry. Not only could this proposed policy result in greater competition amongst pension providers, but it may also help to improve public knowledge around pensions – a crucial area which remains widely misunderstood. Although there will surely be challenges around its implementation, this legislation could generate hugely beneficial long-term change.
“Otherwise, today’s announcement heralds relatively little meaningful change, which we may expect instead to see in the spring budget next year. Speculation around personal tax cuts and changes to inheritance tax rules have failed to materialise (except for the NI changes), and while inflation rates have halved, they remain strikingly high. High inflation significantly erodes individual wealth and we shouldn’t expect to see inflation levels return to ‘normal’ for a couple more years, indicating that the nation is still set to endure a challenging period ahead.
“The abolition of Class 2 National Insurance will have some positive effects for workers, including the self-employed, but the benefits of reduced government borrowing are unlikely to line the public’s pockets. Overall, today’s announcement hasn’t brought the British public many Christmas presents…but we might hope for some Easter eggs in next year’s spring budget, particularly as a general election looms.
“Today’s Autumn Statement will also affect everyone differently, depending on their circumstances. The best way for every individual and household to maximise their finances is to consult a qualified financial planner and obtain sound, bespoke advice to help achieve financial goals.”
Emily Deane TEP, Head of Government Relations at STEP, said:
‘It is disappointing that the government has not announced a review of the inheritance tax regime which creates huge complexity for families. We urge the government to review it at the next possible opportunity, with the view to making it simpler, fairer and more effective.
‘Work by the APPG for Inheritance and Intergenerational Fairness, which STEP contributed to, shows there are radical yet practical steps the government could take to achieve this aim while ensuring the exchequer doesn’t suffer a significant shortfall.
“Reform could be as simple as reducing the current 40% fixed rate, removing some of the reliefs, and abolishing potentially exempt transfers. A lower fixed rate alone would simplify the whole system thereby decreasing opportunities for avoidance and abuse.
‘The current system is antiquated and complex and we will continue to work with parliamentarians and the government to improve it.’
Commenting on the government backing down on plans to tax inherited pensions when someone dies under the age of 75, Jon Greer, head of retirement policy at Quilter, said:
“Today’s Autumn Statement confirms a reprieve for the taxation of inherited pensions where a member died before the age of 75. HMRC had previously confirmed in the summer that individuals who died with uncrystallised funds before age 75 and used those to provide beneficiaries with pensions via drawdown or annuity would be taxable. Fortunately, the government has confirmed that such pensions will remain tax free from April 2024 – a continuation of their current treatment.
“This is good news. If the government had gone ahead with the change to the tax treatment there would have been an incentive to take remaining funds as lump sums which are tax free up to the available lump sum and death benefit allowance, which will stand at £1,073,100.
“This confirmation means that there will be a similar treatment following the abolition of the Lifetime Allowance, albeit the amounts that can be used to provide beneficiaries’ pensions tax free appear to be unrestricted in their tax-free status. We look forward to seeing the fine detail in the Finance Bill.”
Elizabeth Neale, Partner at BDB Pitmans, comments on the absence of inheritance tax cuts in the Autumn Statement:
“Given how widely it had been discussed in the press, some may be surprised that the Chancellor did not make any announcements around inheritance tax in his Statement; however he decided to concentrate on business and employment taxation which affects many more people
“It is disappointing that the Chancellor has not taken this opportunity to potentially remove some of the complexities of the inheritance tax system, but there may yet be changes announced in the Spring 2024 Budget. More detail on the future of inheritance tax may or may not emerge in each party’s election manifesto.”
