Financial planning points post the Autumn Statement

Jeremy Hunt, the latest incumbent of the seat of Chancellor of the Exchequer and fourth of the calendar year, delivered his fiscal plan to the country in parliament on 17 November. His proposals represented the third attempt this year to lay down a viable escape route from the high-inflationary environment the UK, and much of the world, finds itself trapped in (the others being the Spring Statement and the mini-Budget).

Without stepping back to look at the causes of our current plight, the message from Mr Hunt and his Treasury Office was that a black hole in the country’s finances to the tune of £55 billion needed to be plugged, and quickly.

Several allowances and exemptions have been frozen or reduced, leading to stealth taxes (given the assumption that tax breaks should increase in line with inflation). A sample of the changes include:

There were further measures included in the package including cost of living payments, an increase to the national living wage and national minimum wage, and an extension of the energy price guarantee – all worth factoring into your planning exercises.

Now the dust has settled, what do the latest measures mean for savers in the UK? How will they impact our investment landscape in the short and medium term and how can we react to preserve and create positive outcomes for our clients?

The two-step reductions to both the capital gains exempt amount and the dividend allowance turns the focus towards pensions and other tax efficient vehicles such as ISAs and Lifetime ISAs. It has always been an obvious play to fully use any subscription allowances (which are unchanged) where finances allow, and this latest tightening further reduces the allure of holding taxable assets – that is unless the individual has a tax loss they are waiting to crystallise.

Both Bed & ISA and Bed & SIPP transactions to migrate assets into the shelter of tax-exempt accounts can also be considered where your pension scheme administrator / ISA manager allows, and your client has the necessary earnings or sufficient unused allowance for the tax year to support the contribution / subscription.

The current standard lifetime allowance for pensions remains frozen at £1,073,100 until 2025/26 as previously announced. Perhaps surprisingly this was not subject to the extended freeze to April 2028 felt by the various Income Tax bands. This suggests pensions will be amongst the first to feel an easing as we reach the second half of the decade.

Meanwhile, the decision to row back on Kwasi Kwarteng’s Stamp Duty Land Tax threshold increases after 31 March 2025 draws a line in the sand for those looking to purchase residential property in the short term. For example, the nil-rate threshold for First Time Buyers Relief was recently increased from £300,000 to £425,000 and under current plans this will be re-adjusted back down to its original level in readiness for the 2025/26 tax year. This could bring Lifetime ISAs into immediate view for many, with the potential to make up to three tax years’ worth subscriptions of up to £4,000 each, receiving a government bonus on top. Just keep in mind that the account must be open for 12 months before the property is purchased and this countdown clock starts when the application has been accepted and the first payment received.

When all has been said and done, Mr Hunt’s Autumn Statement seeks to jump-start the conveyor belt for increased tax collections in coming years, bringing new taxpayers into the system and progressing those with growing earnings into the next band up. Now more than ever there is a need to plan carefully around your client’s tax liabilities.