What is the autumn statement and how does it affect me?

What is the Autumn Statement?

The Autumn statement sets out the government’s tax and spending plans for the year ahead. It explains how much funding public services will receive in the coming year and can affect everything from your take-home pay to your pension pot. 

Is the autumn statement a budget?

Yes, the Autumn Statement is a budget. It’s designed to outline how the government plans to spend money over the coming year. Sometimes its projections go several years into the future, committing to spending a set amount on public services or initiatives.

What was in the autumn statement 2023?

Most of the 2023 Autumn Statement was focused on initiatives to boost businesses, but there are some announcements that are relevant for homeowners and first-time buyers.

Here are some of its key points at a glance:

• The government will continue to ‘guarantee’ 95% mortgages, making it easier for people  to buy a house with a small deposit
• The state pension will increase in line with the ‘triple lock’
• The Chancellor says he wants to reform taxes paid by self-employed people
• Benefits are set to increase, but the government has committed a total of £2.6bn to encourage claimants to find work

What does the autumn statement mean for me?

It can be hard to digest from the news what in the autumn statement is relevant for everyday people, so we’ve laid it all out below.

First-time buyers 

The government will extend the Mortgage Guarantee Scheme by 18 months to make it easier for first-time buyers to get on the ladder with a 5% deposit. 

First introduced in 2021, the scheme gives lenders the confidence to approve 95% mortgages by promising to compensate them for a percentage of their losses if a borrower’s home is repossessed. The scheme will now end in June 2025, instead of December this year.  

Aside from reassurance that 95% mortgages will continue to be readily available, the autumn statement has offered little support for aspiring homebuyers. Previous budget announcements offered help in the form of the Help to Buy scheme (no longer available), and Lifetime ISA.

The Chancellor did promise £110 million over the next two years for “unlocking 40,000 homes", as well as another £32 million to develop new dwellings in Cambridge, London & Leeds and £450 million to the local authority housing fund to deliver 2,400 new homes. 

However, housebuilding over the last year has slowed down after the disastrous mini-Budget last autumn, the end of Help to Buy, and soaring mortgage rates hitting buyers’ affordability. So an influx of new houses is a welcome change, but even with these new pledges we’re still not filling the backlog.

According to one study by the Centre for Cities, England needs 442,000 new homes a year to close the gap. This means the government’s 300,000 new homes a year target will not clear the backlog for half a century.

If you’d like to buy a home in 2024, don’t be discouraged by the lack of new government initiatives. Here at Tembo, we specialise in helping first-time buyers overcome common mortgage affordability obstacles, boost their budget, and finally pick up the keys to their dream home.

Learn more: How much deposit do I need for a house?

Energy bills

Households living close to new pylons and transmission infrastructure will receive up to £1,000 a year off their energy bills for a decade, but this will make no difference to the majority of households struggling with rising energy costs.

Savings and investments

Savers will be able to open multiple ISAs of the same type in a tax year without losing their tax-free ISA allowance. This will make it easier to access more competitive rates. 

If you have an Innovative Finance ISA, you’ll soon be able to include long-term asset funds and open-ended property funds with extended notice periods. 

Learn more: What is a Lifetime ISA? and Best Lifetime ISA providers in the UK 

Income and taxes

The National Living Wage will increase from £10.42 to £11.44 an hour from April. Previously, only those aged 23 and older were eligible for the National Living Wage but this will change to include 21 and 22-year-olds. 

The main rate of National Insurance has been cut from 12% to 10% from the 6th January, affecting 27 million people. Apprentices’ hourly pay will also increase by over 20%, from £5.28 to £6.40 per hour.

However, some are calling for a rise to £15 per hour by the end of 2024, as most pay packets have fallen in real terms over the last decade by failing to keep up with inflation. If this was put in place, it would give a real pay rise to nearly 14 million people.

Self-employed National Insurance

If you’re self-employed, you may see a change in the amount of National Insurance you pay. 

Class 2 National Insurance (which you’ll pay if you earn more than £12,570) will be abolished from April. Meanwhile, Class 4 National Insurance will be lowered from 9% to 8% from April. You’ll pay Class 4 NI contributions on profits between £12,570 and £50,270.

The Chancellor claimed this would save the average self-employed taxpayer £350 a year, benefitting almost 2 million people. However, due to high inflation and wage growth, more people have moved into higher tax bands. So even with £350 saving a year, many self-employed people are still being hit hard by other taxes.

Pensions

The government has confirmed that the UK state pension will increase by 8.5% from April, in line with average earnings. This will see the new state pension rise to £221.20 per week (approximately £11,502 a year) in April 2024. 

If you reached the state pension age on or before 5th April 2016, your state pension will increase to £169.50 per week (around £8,800 a year). The government will hold a consultation to determine whether savers should get a ‘legal right to require a new employer to pay pension contributions into an existing pension.’ 

According to Jeremy Hunt, such a reform could result in an extra £1,000 a year in retirement savings for the average worker who starts saving when they turn 18. 

Spending

All alcohol duty will be frozen until the 1st of August 2024. Duty on tobacco products will increase by 2% above RPI inflation, while duty on hand-rolling tobacco will increase by 12% above RPI.

There was no reference to fuel duty throughout the Autumn Statement, suggesting it’ll stand at 52.95p per litre for petrol and diesel. In March, the government announced a temporary 5p per litre reduction in fuel duty which is set to end in March 2024. 

Benefits

Universal credit and other working-age benefits will increase in England and Wales by 6.7% from April. This is in line with September’s inflation rate.

The government has pledged £1.3bn of funding over the next five years to help people with health conditions to find work. It’s also promised a further £1.3bn to help people who have been unemployed for more than a year.  

The Work Capability Assessment will be reformed to reflect the increase in working from home following the pandemic.

Claimants in England and Wales who refuse to seek employment may lose access to their benefits and free prescriptions if they’re deemed able to work. 

The government also said it will unfreeze Local Housing Allowance rates from April, increasing them to 30% of local rents. 

When will the autumn statement take effect?

Many of the changes announced in the Autumn Statement will take effect from April 2024, such as the rise in state pension payments and the increase in Universal Credit. But some of the government’s promises will take immediate effect, such as the freeze on alcohol duty until August 2024.

The government has also promised to extend certain initiatives that were set to end in the near future, such as the Mortgage Guarantee Scheme which was originally set to end in December but will be protected until June 2025.

How have markets reacted to the autumn statement?

The markets remained largely unchanged following the Autumn Statement. The Financial Times Stock Exchange 100 Index (FTSE 100) declined by 0.3% on the day, and the FTSE 250 rose by 0.7%. While the pound fell slightly against the dollar, from $1.254 to $1.246.

It was a year ago that Liz Truss’ Autumn Statement caused market panic, with many investors selling their shares due to fears that the government’s plans could stoke inflation and increase budget deficits. The market chaos led to a series of political changes, with Rishi Sunak becoming Prime Minister and Jeremy Hunt being appointed Chancellor.

What help is there for first-time buyers?

The government’s latest budget announcement might have offered little in the way of support for first-time buyers and existing homeowners, but that doesn’t mean you have limited options. 

Here at Tembo, we have a number of tricks up our sleeves to help people get onto the property ladder sooner or remortgage their home. These include guarantor mortgages, shared ownership schemes, and buying with friends.