The Autumn Statement is based on forecasts from the Office for Budget Responsibility, delivered by the Chancellor of the Exchequer. It is an update on the government’s plans for the economy. This year’s Autumn Budget is particularly interesting with a general election on the horizon. Voters and businesses alike will be looking for any taxpayer-friendly, vote-winning measures.
Can we expect tax cuts?
Paying taxes in a cost-of-living crisis is a key consideration for individuals and especially small businesses. In previous statements the chancellor has said that the way to “put money in people’s pockets is to halve inflation”.
The chancellor has had calls from Conservative MPs to make tax cuts ahead of the general election next year. However, the chances of that happening appear unlikely. The Chancellor recently told a media outlet that ‘tax cuts will be ‘virtually impossible’ to make happen until the country’s high levels of debt are brought down and the economy is under control’.
He said: ‘All I would say is, if we do want those long-term debt costs to come down, then we need to really stick to this plan to get inflation down, get interest rates down. ‘I don’t know when that’s going to happen. But I don’t think it’s going to happen before the Autumn Statement on 22 November, alas.’
Pensions and benefits are always a focal point of any financial statement. There are rumours the Treasury is considering plans to amend the ‘triple lock’.
In place since 2010, the triple lock guarantees pensions will be boosted by either September’s inflation, earnings growth (from the period between May to July) or 2.5% – whichever is highest. Based on current wage growth figures, it would mean a rise of 8.5% from April 2024.
However, the government may decide to exclude bonuses from its earnings growth calculation, thus lowering this figure to 7.8%. The move could reportedly save the government around £1bn.
Any amendment to the triple lock rule would be controversial, and the Conservative party did promise in their last election manifesto not to tamper with the formula.
Despite the government insisting repeatedly that tax cuts are not currently on the table, reports suggest that senior government ministers are discussing the possibility of making changes to inheritance tax (IHT).
Put simply, under current rules, IHT is charged at 40% on assets or money you leave to heirs over the tax-free threshold of £325,000. One suggestion reportedly being considered is a cut to the 40% rate, before eventually scrapping the tax altogether.
Other views are that the amount that could be passed on free of tax could be increased and made fairer by removing the additional allowance of £175,000 Residence Nil Rate Band, a more recent additional allowance for those who gift their main residency to their direct descendants such as children and grandchildren. Hence increasing the standard nil rate band to £500,000 would not only make things simpler but arguably fairer too, as anyone without children could also pass on £500,000 free of tax.
What has been said by a cabinet minister recently is that: ‘I think it’s a question, for many people, of aspiration, and people know that there’s something deeply unfair about being taxed all their lives and then being taxed in death as well.’
The current system of ISA savings accounts could be reviewed to make it easier for customers to invest their money.
With six different types of ISA available presently with different aims and rules. A new system allowing people to hold both cash and investments in one ISA account would demystify this tax-free allowance.
Included in the overhaul of the ISA system could also include increasing the annual ISA tax-free allowance from £20,000 to £30,000 – but only for savers that open a stocks and shares ISA.
Investors may perhaps have to place some of the additional allowance into shares, in keeping with the government’s aim to encourage investment into British businesses.
For more insights on potential measures from the Chancellor in his Autumn Statement, view the full Wishlist article from MHA.
For further guidance
For further guidance on any of the tax measures discussed in this article, please contact your usual advisor or contact us here.
Read the latest Autumn Statement 2023 commentary from MHA – visit the MHA website here where you’ll find resources, advice and practical guidance on what any new tax measures could mean for you and your business, to help you prepare for and manage their impact.