The Autumn Statement is going to be delivered on the 22nd of November. The date was set by Jeremy Hunt, Chancellor of the Exchequer earlier this year. The event marks an important date for us all, as Hunt is going to update MPs on the state of the country’s finances while going over the government’s plans for both tax and public spending. This will be based on a report from the OBR, or Office for Budget Responsibility. Although we don’t know for sure what is going to be said, rumours are swirling about what could be in the pipeline.
Plans for Taxation and Public Spending
The announcement should include plans for public spending and taxation. Right now, Jeremy Hunt is under immense pressure from Tory MPs to slash taxes, after several threshold freezes. This came into force in April, alongside a reduction of allowances. The chances of this happening, however, remain slim.
The Chancellor has already told LBC Radio that right now, tax cuts are nearly impossible. A lot of this comes down to the country’s high level of debt. When the economy is under control and the debts have been reduced, a tax cut could be an option. In an interview with Andrew Marr, Hunt also clarified that it is the government’s priority to try and make good on their promise to reduce inflation. The pledge was made when inflation was around 10.1%. They aimed to have it drop to 5% by December. Right now, the current rate is hovering around 6.7%.
Other rumours include changes to HS2 plans. The former transport secretary, and the current leader of the Ministry of Defence has not confirmed that the high-speed rail line is going to be scrapped, but has hinted that the Prime Minister is willing to make some tough calls.
The Chancellor may be tempted to cut benefits, to find room in the budget to facilitate tax reductions. Benefits are usually increased each April to stay in line with inflation. Inflation is expected to be lower than that of the previous September, meaning Hunt could use this as an argument to lower the rise. The government is yet to deny this rumour, implying that it could be a measure they are going to implement.
If you are hoping for an increase in your state pension, don’t hold your breath. Rumours are that the Treasury is going to be tinkering with the current triple-lock. This is a protection that dates back to 2010. It guarantees that pensions will be boosted by the inflation amount from September or the earnings growth. The government may, however, decide to eliminate bonuses from their calculation. Any tweak to the rule regarding the triple-lock would prove controversial, but it could save them over £1 billion.
Could an ISA shake-up be on the horizon? The current system regarding ISA savings could be reformed so that it is simpler and easier for people to save. Right now, there are six types of ISA products, and each of them has a distinct set of rules and aims. The overall change could mean that the tax-free allowance is boosted from £20,000 to £30,000, but only for those who have a stocks and shares ISA. It’s possible that the Treasury will make this the default, for new customers.
Lots of rumors around this one over the last couple of weeks, even the prime minster eluded that they could be changed or even abolished! This may sit well with the older voters, enabling them to pass on more wealth to younger generations but with it collecting some £7 billion in the last year for government, they may just tweak it slightly, if at all. In most cases, for most people, this is an easily avoidable tax if just a little planning is done before hand, so do not wait around for the government to solve the problem, speak with Klarity Tax.
Tax Allowances & Thresholds
Over the past couple of budgets, many allowances/thresholds have been frozen and even reduced and this I think, may well be the underlying trend. These methods are not felt initially, as they seem small or not significant, but they ensure more people are pulled into higher tax bands and pay more in other taxes, in other areas, such as CGT. Again, planning beforehand, can help minimise the effects.
In all we could see a few minor tweaks here and there, that on the surface look initially like tax savings, but something else will probably be frozen, increased or spending reduced, meaning the taxes the government receive will broadly stay the same or increase (which they will be hoping to do, as spending is so high).
My feeling is that unfortunately taxes will only increase in future years and as we are currently one of the highest taxed nations in the world, it looks like the only way is up. It makes it more important than ever to stay on top of your tax position and take advantage of any potential tax savings as soon as they arise.
We will be issuing our own brief after the autumn statement, so keep a look out in your inbox.