Pensions:
- The government will legislate in the Autumn Finance Bill 2023 to remove the Lifetime Allowance. The measure will clarify the taxation of lump sums and lump sum death benefits, and the application of protections, as well as the tax treatment for overseas pensions, transitional arrangements, and reporting requirements. This will take effect from 6 April 2024.
- The maximum pension commencement lump sum for those without protections will be kept at 25% of the fund up to a maximum of £268,275 (25% of the lifetime allowance of £1,073,100). The figure of £268,275 will be frozen thereafter.
- A pension commencement excess lump sum will be introduced. Payment of a pension commencement excess lump sum will be taxed at an individual’s marginal rate of income tax.
- For individuals with valid enhanced protection, the tax-free part of any serious ill health lump sum or lump sum death benefit will be limited to the total value that could have been paid under that arrangement on 5th April 2024. Marginal rate of income tax will be applied on any excess.
- A transitional calculation will be provided so individuals can calculate their available lump sum allowance and lump sum and death benefit allowance. This is to account for benefits taken before 6th April 2024.
- However, if you have already used 100% of your lifetime allowance (LTA) then you will have exhausted any allowances and you will not be considered for a transitional calculation.
Abolishment of the Lifetime Allowance means that retirees can now save into their pension pot without having to worry about penalizing tax charges, however, you will still be taxed when taking an amount of tax-free cash that exceeds the new thresholds of 25% of the fund value or £268,275. This is great news for those who have worked hard and saved persistently throughout their working lives. Furthermore, the changes also provide an incentive for those who have stopped saving into a pension due to previously hitting the LTA to start saving again.
ISAs:
- The government will allow multiple subscriptions to ISAs of the same type every year from April 2024.
- The government will allow partial transfers of ISA funds in-year between providers from April 2024.
- The government will remove the requirement to reapply for an existing dormant ISA from April 2024.
- The government will allow Long-Term Asset Funds to be permitted investments in the Innovative Finance ISA from April 2024.
- The government will allow open-ended property funds with extended notice periods to be permitted investments in the Innovative Finance ISA from April 2024
- The government will harmonise the account opening age for any adult ISAs to 18 from April 2024.
- ISA allowances remain frozen on current level for 2024-25.
- You’re allowed a certain fractional shares contract as a permitted investment.
- All the annual allowances will remain frozen for all ISA wrappers for (CTF) 2024-25.
This will mean a lot more freedom and choice for those with ISA account/s or ones looking to open one. You will be able to sign up to multiple ISAs of the same type every year, provided the overall maximum ISA allowance isn’t breached. Also, partial transfers between different providers will also be allowed.
Tax changes:
- Class 3 rate will remain at £17.45 per week. This will not affect existing arrangements for payments of voluntary Class 2 or Class 3 NICs connected with previous tax years.
- Class 1 NICs will be reduced from 12% to 10% from 6th January 2024
- Class 4 NICs will go down from 9% to 8% on profits between £12570 and £50,270, any profits above £50,270 will remain at 2%.
- Class 2 NICs will be abolished from April 2024, voluntary contributions will be allowed.
- Income thresholds, personal annual allowance have all remained the same.
- The government will freeze the Lower Earnings Limit (LEL) and the Small Profits Threshold (SPT) at 2023-24 levels in 2024-25.
- A technical change will be made to Table A of section 660 of the Income Tax (Earnings and Pensions) Act 2003 (ITEPA) in the Autumn Finance Bill 2023, to ensure that the legislative reference to the Scottish Government’s Carer Allowance Supplement is correct.
Reduction in NICs tax rates will help to increase households’ disposable income and it simplifies tax system for self employed who also will enjoy reduced rates.
Childcare:
- All eligible working parents in England will be able to access 30h of free childcare per week for 38 weeks per year from when their child is 9 months old to when they start school.
Cost of living support:
To further support low-income households with increasing rent costs, the government will raise Local Housing Allowance rates to the 30th percentile of local market rents in April 2024. This will benefit 1.6 million low-income households, who will be around £800 a year better off on average in 2024-25. Taken together, support to households to help with the high cost of living is worth £104 billion over 2022-23 to 2024-25, or £3,700 per household on average.
The government will continue to provide support to households vulnerable to cost of living pressures. In 2023-24 this includes making Cost of Living 22 Autumn Statement 2023 Payments and providing £1 billion for the Household Support Fund. From April 2024, rates of the Local Housing Allowance will be increased to the 30th percentile of local market rents to help low-income households with housing costs.
| Main personal allowances and reliefs | 2023/24 | 2024/25 | Effect |
| personal allowance | £12,570 | £12,570 | same |
| reduction in personal allowance of £1 for every £2 of adjusted net income over: | £100,000 | £100,000 | same |
| marriage/civil partners’ transferable allowance | £1,260 | £1,260 | same |
| income limit for married couples’ allowance | £34,600 | £37,000 | positive |
| blind persons allowance | £2,870 | £3,070 | positive |
| rent-a-room relief | £7,500 | £7,500 | same |
| High income child effect charge | 1% of effect per £100 of adjusted net income between 50,000-60,000 | same | |
| Non-dividend/non-savings income | 2023/24 | 2024/25 | Effect |
| Basic rate tax band | £37,000 | £37,700 | same |
| Basic rate tax rate: | 20% | 20% | same |
| Higher rate tax band | £50,270 | £50,271 | same |
| Higher rate tax rate: | 40% | 40% | same |
| Additional rate of 45% on income over | £125,140 | £125,141 | positive |
| Savings and dividends | 2023/24 | 2024/25 | Effect |
| Starting rate band for savings: Starting rate band for tax: | £5,000 0% | £5,000 0% | same |
| Starting rate band not available if taxable non-savings income exceeds the starting rate band | |||
| Personal savings allowance at 0% – basic rate | £1,000 | £1,000 | same |
| Personal savings allowance at 0% – higher rate | £500 | £500 | same |
| Personal savings allowance at 0% – additional rate | £0 | £0 | same |
| Dividend allowance at 0% – individuals | £1,000 | £1,000 | same |
| Dividend tax on excess – basic rate | 8.75% | 8.75% | same |
| Dividend tax on excess – higher rate | 33.75% | 33.75% | same |
| Dividend tax on excess – additional rate | 39.35% | 39.35% | same |
| Trust: Standard rate band generally | £1,000 | £1,000 | same |
| Trust tax rates – dividends | 39.35% | 39.35% | same |
| Trust tax rates | 45% | 45% | same |
| Pensions | 2023/2024 | 2024/2025 | Effect |
| Lifetime allowance (LTA) | £1,073,100 | n/a | unknown |
| LTA tax charge | n/a | n/a | same |
| PCLS (pension commencement lump sum)/ tax-free cash | max 25% of £1,073,100 | max 25% of fund value or £268,275 | same |
| Money purchase annual allowance (MPAA) | £10,000 | £10,000 | same |
| annual allowance | £60,000 | £60,000 | same |
