When he delivered his Autumn Statement in 2022, the Chancellor announced that he would be slashing the Capital Gains Tax and Dividend Tax allowance. Furthermore, he extended the threshold freeze for both Income Tax and Inheritance Tax to 2028.
According to The Times, the Office for Budget Responsibility (OBR) estimates the Income Tax threshold freeze and allowance cuts alone will generate £25 billion in a year for the Treasury in 2027/28.
It's no small surprise then, that the article reveals the Chancellor is under pressure from fellow Tories to reduce taxes. With a General Election looming, Conservative MPs are no doubt eager to provide help to the millions of Britons who have seen their tax bills rise and get more potential voters on side.
While The Guardian suggests the MPs’ hopes are likely to be dashed when the Chancellor, Jeremy Hunt, reveals his Autumn Statement on Wednesday 22 November 2023, the BBC makes for more uplifting reading. It reveals that the Chancellor may well reduce Income Tax or the amount paid on National Insurance Contributions (NICs) during the statement.
As you can see, there has been plenty of speculation about what might be announced by the Chancellor. Read on to discover some of the changes Mr Hunt may have up his sleeve, according to the media, financial experts and pundits.
Inheritance Tax might be reduced
Often dubbed the ‘most hated tax in Britain’, many more households are now potentially exposed to Inheritance Tax (IHT) after the Chancellor froze its threshold until 2028. As assets such as investments and property have the potential to increase, the static threshold increases the chances of households facing an IHT tax charge for the first time, or an increased charge.
In 2023/24 IHT is typically charged at 40% on any portion of your estate that’s over your nil-rate band (NRB). This is the amount you’re allowed to have in your estate on death before IHT is charged. In 2023/24, your NRB is between £325,000 to £1 million, depending on your circumstances.
Speculation is rife about what Mr Hunt might be planning to do with the tax. According to This is Money, there has been talk that the rate of IHT could be slashed to 20%, however some in the financial press have expressed doubt that this will happen during this Wednesday’s statement.
There has also been talk that the NRB may be increased from £325,000 per person to £500,000 per person. If the latter were to happen, it would mean that married couples would typically have a £1 million threshold regardless of their circumstances.
The Personal Savings Allowance freeze may be scrapped
The Personal Savings Allowance has been set at the same level since 2016, which is why there have been calls to end the freeze that’s currently on it until April 2028. In 2023/24, the Personal Savings Allowance stands at £1,000 for basic-rate taxpayers and £500 for higher-rate taxpayers. Additional-rate taxpayers don’t receive an allowance.
If interest earned is more than your allowance, it’s typically liable to Income Tax at your marginal rate. Due to higher interest rates in 2023, many people have faced an unexpected tax charge on the income they’ve earned from their savings.
The State Pension ‘triple lock’ could be amended
Currently, the State Pension increase is calculated using the ‘triple lock’ formula. This means the benefit is increased using the highest of the following three measures:
- inflation
- wage growth
- 5%.
As wage growth was the highest of the three measures in September, when the components are determined, the State Pension could rise by 8.5% in 2024. As such, it could see another significant hike following the 10.1% increase this year, meaning those eligible for the benefit could receive up to £11,501 as from April 2024.
The level of the increase, and the potential drain on the national economy, has led to rumours that the government may ‘tinker’ with the triple lock. According to The Times, instead of using wage growth that includes bonuses, the Chancellor may instead use wage growth that doesn’t include bonuses, which would lower the increase to 7.8%.
The ISA system could be overhauled
According to media reports, Mr Hunt may cut back the confusingly high number of ISAs, which means it might be possible to have a single ISA holding both cash and shares. Currently, you have to hold them separately in either a Cash ISA or Stocks and Shares ISA.
There may also be changes to the Lifetime ISA as there has been concern over its high penalty charges and property purchase cap of £450,000. There has also been media speculation that a new Stocks and Shares ISA for UK-listed companies only could be unveiled.
The removal of the Lifetime Allowance could be delayed
Broadly speaking, as long as you’re not drawing an income from your pension, you can place any amount into it. That said, the overall amount that receives tax benefits is limited to the Lifetime Allowance (LTA), which in 2023/24 stood at £1,073,100.
When the government revealed that it intended to abolish it in the 2023 Spring Budget, it was widely welcomed as the LTA is seen by many as unfairly punishing those who have diligently set money aside for their retirement.
Yet the The Times reveals that the government may postpone the abolishing the LTA from April 2024 to April 2025.
Stamp Duty might be cut
According to The Telegraph, the Chancellor might be planning to offer more help to those wanting to buy their first home. One way he may do this could be to increase the stamp duty thresholds or reform first-time buyer schemes.
Small businesses could be given a helping hand
The Autumn Statement may provide some welcome announcements for small business owners, the media has speculated. There has been talk that Mr Hunt could cut business taxes in an attempt to stimulate growth in the economy and may extend the 'full expensing' capital allowance scheme.
This allows businesses claim back all of the investment costs of new IT equipment and machinery. In addition to this, a cut to the National Insurance Contributions (NICs) made by employers is seen as likely, the BBC recently reported.
That article also reported that the Chancellor is not expected to extend the freeze on business rates.
The contents of this article are accurate at the time of writing.
Get in touch
If you would like to discuss how the Autumn Statement might affect your finances, investments or wider wealth, please contact us on 01527 577775 or speak to one of our advisers, as we’d be happy to help.
Monday 20 November 2023 | 3pm