Autumn Statement Predictions: What to Watch Out For
The Chancellor’s Autumn Statement is a chance for the government to provide an update on their plans for the UK economy on top of those announced in the spring budget. It can involve revisions of tax laws as well as updates on government spending plans which in turn can have substantial effects on small businesses and the self employed. There are often rumors surrounding the content of this statement which we will cover in this blog so you know what to look for that may affect you.
The budget this year will be delivered on the 22nd of November and Chancellor Jeremy Hunt is under pressure to lower the tax burden in the UK to ease the effects of the cost of living crisis as well as stimulate the economy. The forefront issue being talked about is potential chances to the inheritance tax system in the UK. Further issues that Mr Hunt is expected to deal with include pensions, housing and ISAs.
Importance of the Autumn Statement
The Autumn Statement holds significance for business as it seeks to manipulate the economy to achieve the governments targets through economic policies. Currently the Bank of England is using higher base rates to attempt to control CPI inflation which has had a negative affect on many industries and individuals. Together the current policies have created a challenging environment for businesses to grow and it is vital to attempt to optimise your affairs.
Planning ahead and seeking professional advice can ensure that you, and your business, can make informed decisions and help you set up to succeed.
Taking advantage of potential changes to savings and tax rates may potentially help you keep hold of more of your income and plan for the future, an increasingly important matter due to uncertainty and recent high inflation. Potential changes to ISAs, including higher allowances for investors in domestic industry that trade in UK financial markets, may mean a change in the way you save your money to maximise your returns and savings.
Inheritance Tax Changes
Recently there have been calls by over 50 Conservative MPs to revise the inheritance tax (IHT) legislation in order to simplify the process and lower the number of families who have to pay IHT. Currently the IHT headline rate is 40% on the value of the deceased’s estate that exceeds £325,000, leaving your main residence to your children will increase your tax-free allowance, also known as the nil rate band, by £175,000 to £500,000.
Recent pressure on the prime minister Rishi Sunak has been to lower the 40% rate before phasing out the inheritance tax system altogether. Another alternative proposed by the tory backbenchers is that the residence nil-rate band is scrapped and the basic allowance is increased to £500,000. These proposals are at odds with Chancellor Hunt’s statement in September in which he claimed it would be virtually impossible to reduce tax rates until the economy had improved and stabilised, this however may be possible due to recent revisions of GDP data which point towards the UK’s recovery from the covid pandemic was stronger than initially thought.
It is likely we will see some revisions to the inheritance tax structure but their implementation may be postponed to a later date. Regardless, inheritance tax planning is an important thing to think about and implementing a plan can help you reduce your liability while the rates prevail. Talking to a tax advisor about your plans can help you find efficiencies to help you pass on your estate with minimal fuss and tax deductions.
ISAs and savings changes
There are also rumours of potential changes to Individual Savings Accounts (ISAs) and personal savings allowance (PSA) to incentivise saving and investment across the board. The current system has a four potential types of ISA for investors to save to £20,000 a year, with the capital gains and interest accumulated in these ISAs not subject to taxation. The point of this is to promote private savings in addition to pensions in order for more people to achieve financial security.
The speculated changes to this system include creating a new ISA that you can hold cash as well as stocks and shares in. This would simplify ISA investments allowing people to choose between riskier investments and more secure interest accumulation.
Furthermore, Mr. Hunt has been said to be considering offering an additional tax free allowance to savers who are investing in British companies. This would meet the governments interests of boosting domestic growth as well as giving the opportunity for savers to potentially make greater tax savings.
Will there be income tax cuts in the Autumn Statement?
Perhaps the main tenet of fiscal policy that interests individuals is potential changes to the tax rates and thresholds for income tax. Unfortunately for some the likelihood of a decrease in the tax burden on individual’s income seems small. Mr. Sunak froze thresholds for income tax for 5 years in 2021 when he was chancellor, meaning people may move into a higher tax bracket if they experience wage growth. This, combined with Mr. Hunt’s statement about the difficulties arising from cutting taxes, makes it unlikely we will see a change to income tax thresholds and rates, including the personal allowance, in the Autumn Statement this November.
Potential changes affecting housing
One final area that there has been speculation around is help for first time house buyers. There are a number of way in which this may be implemented but they all revolve around reducing the amount of initial capital that a potential buyer must have to get on the housing ladder.
One option being discussed is an extension to the mortgage guarantee scheme which allows buyers to purchase their first house with a deposit as small as 5%. The Government will underwrite some of the risk in order for buyers to have a better opportunity to buy their first property. Extending this scheme will offer a greater opportunity for first time buyers to get on the housing ladder.
There is also potential for a revision of the stamp duty thresholds which in turn will lower the cost of buying a house and stimulate the housing market.
What will affect me in the Autumn Statement?
Changes to tax legislation that arise from the autumn statement can affect a wide range of people. Changes are usually implemented at the beginning of the tax year in April and therefore there is time to plan ahead before next year.
If you are unsure about what the statement means for you then it is advisable to speak to a tax professional who can take the time to understand your personal position and will advise you on ways to minimse your tax liability and maximise any benefits afforded to you. If you are in need of inheritance tax planning or wish to explore alternate avenues of savings to minimise your tax liability please do not hesitate to get in touch.
Get in touch with Sherwin Currid today to get advice on tax efficiency for you personally or your business.