The Autumn Statement 2023, delivered by Chancellor Jeremy Hunt last November, introduced some important changes to how ISAs work, as well as a reduction in National Insurance for the nation’s workers.

We round up some of the key takeaways from the statement that will impact people’s personal finances.

National Insurance cut: A financial boost for working individuals

One of the most significant announcements was the reduction of the main rate of National Insurance Contributions (NICs) paid by both employees and self-employed individuals. Effective from 06 January 2024, this cut is expected to provide an average worker with a £330 boost to their take-home pay.

Under the changes, Class 1 NICs will reduce from 12% to 10% on earnings between £12,570 and £50,270. Above that level, the NIC will remain at 2%. Full details can be found here.

ISA amends: Enhancing tax-free savings potential

The Government introduced a goal of greater flexibility and choice for savers’ tax-free ISA allowance. From April 2024, the Government will abolish the current restriction of holding only one ISA of each type per year, with the industry challenged to make the required changes to implement that goal.

As the changes are introduced, individuals will be free to maintain multiple subscriptions to the same ISA type, allowing them to maximise their savings potential and pursue the best interest rates across different providers.

To further enhance flexibility, the Government will permit partial transfers of ISA funds between providers during the same tax year. This flexibility empowers savers to switch providers seamlessly and optimise their investment strategies.

Currently, savers can open one cash ISA and one stocks and shares ISA per year. Therefore, if they opened a fixed-rate cash ISA (which doesn’t allow top-ups) and they didn’t utilise their full allowance, they would not be able to subscribe later in the year to a different ISA to make the full contribution.

Paragon is one of a handful of providers that offers the option to split current year subscriptions. We call this our ISA wallet, which enables savers to open a number of cash ISAs each tax year so that they can maximise their returns. You can find full details here.

Elsewhere, the age limit for ISAs was tabled for streamlining, eliminating the current distinction between Junior and Cash ISAs for 16 and 17-year-olds. This change will establish a unified minimum age of 18 for ISA ownership.

While these significant ISA reforms are welcomed, many hoped for an update to the ISA allowance, which has remained at £20,000 for ISAs and £9,000 for junior ISAs since 2017/18. However, the allowance will remain at its current levels.

Pension 'Pot for Life' scheme: Streamlining retirement planning

The Government proposed a new 'pot for life' pension scheme, eliminating the requirement for savers to transfer their pension funds at retirement. This simplification could enhance flexibility and choice for pension holders. By eliminating the need for unnecessary transfers, the proposed scheme aims to streamline retirement planning and empower individuals to manage their pension pots effectively.

Changes to Income Tax cash basis: Flexibility for self-employed individuals

The Government announced plans to expand the income tax cash basis for self-employed individuals and partnerships, allowing them to deduct business expenses more flexibly. This change could benefit those with fluctuating income streams, providing greater tax efficiency and potentially boosting their profitability. By simplifying expense deductions, the expanded cash basis aims to enhance financial management for self-employed individuals.

For answers to all of your questions on cash ISAs, visit the ISA section of our website.