Jeremy Hunt has revealed the details outlined in his 2023 Autumn Statement, pledging an augmentation of the state pension, enhancing the flexibility of ISAs, and aiding benefit claimants in securing employment. However, what implications does this Autumn Statement hold for individuals, and when will its provisions come into effect?
In this guide
What is the Autumn Statement?
The Autumn statement outlines the tax and expenditure strategies of the government for the upcoming year. It elucidates the allocated funding for public services in the forthcoming year and can exert influence on various aspects, ranging from your net income to your pension savings.
Is the autumn statement a budget?
Indeed, the Autumn Statement serves as a budgetary framework. Its purpose is to articulate the government’s intended expenditure for the forthcoming year. Occasionally, its forecasts extend over multiple years, entailing a commitment to allocate a specific sum towards public services or initiatives.
What was in the autumn statement 2023?
The majority of the 2023 Autumn Statement concentrated on initiatives aimed at enhancing businesses. Nonetheless, there are specific announcements within it that hold relevance for homeowners and individuals looking to purchase property for the first time.
Outlined below are some of the pivotal highlights from the statement:
- The government will persist in ‘guaranteeing’ 95% mortgages, facilitating easier home purchases with a modest deposit.
- The state pension will experience an elevation in accordance with the ‘triple lock’ mechanism.
- The Chancellor expresses an intention to overhaul the tax system for self-employed individuals.
- Benefits are slated for augmentation, with the government allocating a total of £2.6 billion to incentivise claimants towards employment opportunities.
What does the autumn statement mean for me?
Understanding the relevance of the Autumn Statement for the general populace can be challenging through news sources alone. Therefore, we’ve summarised its pertinent aspects below for everyday individuals.
First-time buyers
The government intends to prolong the Mortgage Guarantee Scheme for an additional 18 months, aiming to facilitate first-time buyers’ access to homeownership with a 5% deposit.
Initially introduced in 2021, this scheme instils confidence in lenders to approve 95% mortgages by pledging to compensate them for a portion of their losses in case of a borrower’s home repossession. The scheme’s termination, initially slated for December this year, has been extended to June 2025.
While the Autumn Statement maintains the availability of 95% mortgages, it offers minimal support to aspiring homebuyers. Prior budgetary announcements included assistance through schemes like Help to Buy (now defunct) and the Lifetime ISA.
The Chancellor pledged £110 million over the next two years to facilitate the creation of “40,000 homes,” along with an additional £32 million for the development of new residences in Cambridge, London, and Leeds, and £450 million for the local authority housing fund to deliver 2,400 new homes.
Despite these commitments, the pace of house construction slowed over the past year due to the previous year’s unfortunate mini-Budget, the cessation of Help to Buy, and escalating mortgage rates impacting buyers’ affordability. Consequently, while the surge in new housing is welcomed, these pledges are insufficient to address the existing backlog.
According to a study by the Centre for Cities, England requires 442,000 new homes annually to bridge the gap. This indicates that the government’s target of 300,000 new homes per year will not eliminate the backlog for approximately fifty years.
For individuals aspiring to purchase a home in 2024, the absence of new government initiatives should not deter them. At Active Mortgages, we specialise in assisting first-time buyers in overcoming prevalent mortgage affordability challenges, enhancing their budget, and ultimately enabling them to acquire the keys to their dream home.
Energy bills
Families residing in proximity to newly installed pylons and transmission infrastructure will receive a reduction of up to £1,000 annually on their energy bills for ten years. However, this measure will have no impact on the majority of households contending with escalating energy expenses.
Savings and investments
Individuals saving funds will gain the flexibility to open multiple ISAs of the same type within a tax year without forfeiting their tax-free ISA allowance. This adjustment aims to simplify access to more competitive interest rates.
For holders of an Innovative Finance ISA, the upcoming inclusion of long-term asset funds and open-ended property funds with extended notice periods will soon be permissible.
Income and taxes
Commencing in April, the National Living Wage will escalate from £10.42 to £11.44 per hour. Formerly, only individuals aged 23 and above were entitled to the National Living Wage, but this criterion will now encompass 21 and 22-year-olds.
The primary rate of National Insurance has been reduced from 12% to 10% effective from January 6th, impacting approximately 27 million individuals. Additionally, apprentices’ hourly remuneration will witness an increase of over 20%, rising from £5.28 to £6.40 per hour.
Nonetheless, there are calls for a rise to £15 per hour by the conclusion of 2024, given that most salaries have lagged behind in real terms over the past decade, failing to keep pace with inflation. Should this proposal be implemented, it would result in a tangible pay increase for nearly 14 million individuals.
Self-employed National Insurance
For self-employed individuals, alterations in the National Insurance contributions may be evident.
Starting April, the abolition of Class 2 National Insurance (applicable if you earn above £12,570) will take effect. Simultaneously, there will be a reduction in Class 4 National Insurance, decreasing from 9% to 8% from April. Class 4 NI contributions will apply to profits ranging between £12,570 and £50,270.
The Chancellor highlighted that these changes would result in an average annual saving of £350 for the typical self-employed taxpayer, benefiting nearly 2 million individuals. However, due to substantial inflation and wage growth, more individuals have transitioned into higher tax brackets. Consequently, despite the £350 annual saving, many self-employed individuals continue to face significant challenges due to other tax implications.
Pensions
The UK government has confirmed an 8.5% increment in the UK state pension from April, aligning with the average earnings. Consequently, the new state pension will surge to £221.20 per week (approximately £11,502 annually) starting April 2024.
For those who reached state pension age on or before 5th April 2016, the state pension will rise to £169.50 per week (around £8,800 yearly).
Additionally, the government will conduct a consultation to determine whether savers should possess a ‘legal right to mandate a new employer to channel pension contributions into an existing pension.’
Jeremy Hunt suggested that such a reform could potentially yield an additional £1,000 annually in retirement savings for the average worker who initiates savings upon turning 18.
Spending
The government has decided to freeze all alcohol duty until August 1st, 2024. Conversely, duty on tobacco products will rise by 2% above RPI inflation, and duty on hand-rolling tobacco will escalate by 12% above RPI.
Notably, the Autumn Statement did not mention fuel duty, indicating its continuation at 52.95p per litre for both petrol and diesel. In March, the government had announced a temporary reduction of 5p per litre in fuel duty, which is scheduled to conclude in March 2024.
Benefits
Universal Credit and other benefits for working-age individuals in England and Wales will witness a 6.7% rise from April, aligning with September’s inflation rate.
To aid individuals with health conditions in securing employment, the government has committed £1.3 billion of funding over the next five years. Additionally, an equivalent amount of £1.3 billion has been pledged to support individuals unemployed for over a year.
In response to the shift towards increased remote work post-pandemic, reforms are planned for the Work Capability Assessment.
Claimants in England and Wales who decline to seek employment, if deemed capable, risk losing access to their benefits and free prescriptions.
Furthermore, the government has announced the unfreezing of Local Housing Allowance rates from April, increasing them to 30% of local rents.
When will the autumn statement take effect?
Numerous changes outlined in the Autumn Statement are slated to come into effect from April 2024, encompassing the augmentation in state pension payments and the elevation of Universal Credit. Nevertheless, immediate implementation will be observed for certain government commitments, including the freeze on alcohol duty until August 2024.
Moreover, the government has pledged to extend specific initiatives that were on the brink of conclusion. For instance, the Mortgage Guarantee Scheme, initially scheduled to terminate in December, will now persist until June 2025.
How have markets reacted to the autumn statement?
The aftermath of the Autumn Statement saw relatively minimal market fluctuations. The FTSE 100 underwent a 0.3% decline, while the FTSE 250 recorded a 0.7% increase. Notably, the pound experienced a slight dip against the dollar, decreasing from $1.254 to $1.246. Immediate market responses included pub-related shares such as JD Wetherspoons, Fuller’s, and Marston witnessing an upsurge in their share prices subsequent to the government’s commitment to freeze alcohol duty until August 2024.
A year ago, Liz Truss’s Autumn Statement triggered market unease, prompting several investors to divest their shares amid concerns that government plans might fuel inflation and amplify budget deficits. This turmoil within the market landscape resulted in a sequence of political changes, culminating in Rishi Sunak assuming the role of Prime Minister and Jeremy Hunt being appointed Chancellor.
How have markets reacted to the autumn statement?
The recent budget announcement from the government might have provided minimal assistance for both first-time buyers and current homeowners. However, this doesn’t imply limited options for you.
At Active Mortgages, we possess several strategies to assist individuals in swiftly entering the property market or remortgaging their homes. Our offerings encompass guarantor mortgages, shared ownership schemes, and purchasing properties in collaboration with friends.
What is a mortgage?
A mortgage is a loan used to purchase property or real estate. It allows individuals to buy a home without paying the entire cost upfront. The property itself serves as collateral until the loan is paid off.
How do I qualify for a mortgage?
Mortgage lenders consider various factors, including your income, credit score, employment history, existing debts, and the value of the property you want to buy. These factors help determine your eligibility and the terms of the mortgage.
What types of mortgages are available?
There are several types of mortgages, including fixed-rate mortgages where the interest rate remains constant, adjustable-rate mortgages with rates that can change over time, interest-only mortgages, and government-backed mortgages like FHA or VA loans.
What costs are involved in getting a mortgage?
When getting a mortgage, you'll encounter various costs such as application fees, appraisal fees, closing costs, insurance premiums, and potentially mortgage points (where you can pay upfront to lower your interest rate). It's crucial to understand and budget for these expenses.
Conclusion
Understanding mortgage affordability is crucial when navigating the process of buying a property, ensuring that you make informed decisions aligned with your financial capabilities and goals.
