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Chancellor Jeremy Hunt has announced a range of new tax cuts, benefits and savings measures in his Autumn Statement. But what does it mean for your money? Will you be better or worse off?
The Financial Times convened a panel of experts to answer your questions about how the measures might have an impact on your personal finances.
Claer Barrett, the FT’s consumer editor, joined Emma Agyemang, the FT’s global tax correspondent, Anne Fairweather, head of government affairs and public policy at Hargreaves Lansdown, and Nimesh Shah, chief executive of Blick Rothenberg, to answer your queries in an online Q&A.
The Q&A is now closed but here are the highlights:
FT commenter paul y: Does this mean I’ll be able to switch my DC pension pot — and employer’s contributions — to a self Invested personal pension (Sipp)?
Anne Fairweather, Hargreaves Lansdown: That’s the idea — the chancellor spoke about a “legal right” to nominate your pension scheme of choice. But it’s not clear yet when this will come in. The Department for Work and Pensions is undertaking a “call for evidence” so it might be a while yet. If you want to share your views, the DWP doc is here under part 2.
FT commenter CS9: How does the 2 percentage point National Insurance cut work out as a £500 saving (for someone on say £60,000)?
Nimesh Shah, Blick Rothenberg: For someone earning £60,000, your net income for the current tax year will be £44,038. In the following tax year, your net income will increase to £44,603. The 2 percentage point NIC reduction is worth up to £754 per annum. However, because the 2 per centage point NIC reduction takes effect from January 2024, comparing the saving between this tax year and next tax year gives you £565.
FT commenter Pip Seabeck: Does everyone benefit from the National Insurance reduction, or is it just basic-rate taxpayers?
FT expert Claer Barrett: Great question — those who won’t benefit include pensioners (as you don’t pay National Insurance when you reach state pension age) and those who don’t earn enough to cross the NI threshold — now equalised with income tax at £12,570 a year.
But all other workers will see some benefit, with higher earners seeing the most. For example, those with an income above £50,000 stand to pay £750 less national insurance per year from January (the saving stays pretty much the same for those earning higher amounts than this). But this drops to a saving of £450 for the average worker on a salary of £35,000. Of course, once you take “fiscal drag” into account, we’re all paying more tax than we were. But this will ease the squeeze slightly.
FT commenter CreativeCFO: 3.2mn more people earning over £100,000 a year. Mortgage interest rates at 3-4 times higher than before. Surely the own goal was to either increase the tax-free threshold, abolish losing your tax-free threshold after 100,000 or to change the upper tax band. This NI cut wouldn’t even buy me a dinner out — it certainly won’t bring me back to voting Tory. Is this a missed opportunity?
FT expert Emma Agyemang: Yes, you’re right — a cut to income tax or uprating of the allowances would probably have been simpler and more popular. We may well see something like that offered by the chancellor at the spring Budget. Remember, the government wants to keep some tax giveaways to boost their electoral prospects!
The advantage of cutting National Insurance on employed and self-employed people is, that unlike income tax, this is only paid by workers. (National Insurance is also paid by employers at a rate of 13.8 per cent but there was no cut announced yesterday.) So the government can target it directly as a tax cut for working people. The fact it’s more targeted makes it cheaper too.
Want more? The conversation happened in the comments below, so read on.
