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Autumn Statement set for 22 November 2023
13th September 2023
At a glance - possible announcements
- No specific tax cuts
- A continuation of fiscal drag from frozen allowances
- Preservation of the pension triple lock
- Detailed rules for the single R&D tax relief scheme to start in April 2024
- Removal of double taxation under the IR35 off-payroll rules
- An aspirational statement about reducing IHT (after the next election probably)
- National Minimum Wage to rise above £11 per hour
- Announcement likely on NIC rates from April 2024
- Possible changes to Individual Savings Accounts
The Chancellor of the Exchequer, Jeremy Hunt, has announced that he will present the Autumn Statement to Parliament on 22 November 2023.
The Office for Budget Responsibility (OBR) have been commissioned to prepare an economic and fiscal forecast to be presented to Parliament alongside the Autumn Statement.
The Autumn Statement follows on from the King's Speech on 7 November setting out legislative proposals for the next Parliamentary session.
This will almost certainly be the Chancellor's penultimate fiscal statement ahead of a Spring Budget next year and a general election.
The Autumn Statement is set against the backdrop of cost-of-living issues for families and businesses, rising interest rates (from 0.1% in November 2021 to 5.25% now - the highest it has been in 15 years), and the inflation rate has remained stubbornly high (6.7% in August and September), but now dropping to 4.6% in October, and a 70-year-high tax burden.
And with that highest tax burden for 70 years, the rate of Corporation Tax increasing by 6% from April 2023 (the first rate rise since 1974), and personal tax thresholds remaining frozen until 2028, even If Hunt decides to do nothing at all on tax it will mean a quarter of the UK workforce will be paying higher rate tax within the next 5 years.
In addition, although in the Spring 2023 Budget the Chancellor introduced full expensing for companies to obtain tax relief on their expenditure and to drive investment, there is inevitably a delay in this taking effect, and it only replaced what was already a generous relief in the form of the Super Deduction which ceased on 31 March 2023..
So, can we expect to see some major tax changes announced in November, or will Jeremy Hunt save up any positive tax goodies for a pre-election Budget in the Spring of 2024?
The BBC reports that Hunt is suggesting that any tax cuts are unlikely before the next general election, having warned that inflation and public debt interest payments remain high, noting that his priority is bringing down inflation.
But business groups have called for a reform of the business rates system and an introduction of new measures to boost growth (a year on from Kwasi Kwarteng's now reversed growth Budget).
What lies ahead?
(See also our subsequent article: Autumn Statement 2023 - is Inheritance Tax on the agenda?)
In the coming weeks it may become clearer as to the direction the Chancellor will take with his Autumn Statement. We have become used to strategically-placed leaks in the media to gauge public opinion on certain tax measures, only for some of those proposals to disappear when they attract adverse publicity.
Nevertheless, Hunt will be under pressure from fellow ministers and backbenchers in Parliament to show that the government is listening to the concerns of individuals and businesses about the economy.
He has so far been seen as a tax-raising Chancellor, more concerned about what the markets will think than the impact of his measures on businesses and individuals. This is in stark contrast to his immediate predecessor's (Kwasi Kwarteng's) short-lived growth Budget which Hunt almost entirely reversed (including confirming an end date for the higher stamp duty thresholds, and the freezing of tax allowances).
And whilst the UK continues to avoid a recession by the narrowest of margins, the continuing high tax burden and fiscal drag is not helping to grow the economy. The forthcoming general election is going to undoubtedly see the Chancellor stepping back from some of his tax-raising measures to offer tax cuts and other tax incentives.
A change of government appears likely next year on the basis of current electoral polling (although we know polls are not accurate). That means the current government will have to pull out all the stops to offer sweeteners to the electorate, even though public borrowing is at record heights.
But Labour also has its eye on the next election as we have seen Shadow Chancellor, Rachel Reeves, ruling out any form of wealth tax, or an increase in capital gains tax or the top rate of income tax should Labour come to power next year.
On the topic of a wealth tax, The Scottish National Party is keen to introduce one in Scotland for those with assets (e.g. houses and pension funds) of more than £1m. But to do that it would need to persuade whoever is in charge in Westminster after the next election of the merits of such a policy as it doesn't currently have the necessary powers.
Pensions Triple lock
Another potential battleground for the Chancellor is on pensions and welfare benefits.
The pensions triple lock guarantees that pensions will rise by at least 2.5%, and by either inflation or earnings if they are higher. The Institute for Fiscal Studies has warned that the pension triple lock may be at risk as the cost to the government of maintaining it is ever increasing.
Pensioners may receive around an extra £9 billion in 2024 under the triple lock after new statistics showed wage growth (8.5%) increased above inflation. This means the state pension could rise from £203.85 per week to over £220 per week next April, building on last year’s rise of more than 10%.
It seems unlikely, however, that Hunt would want to signal a removal of the commitment to the triple lock this side of an election, but it's worth remembering that back in 2021 it was temporarily suspended by the then Chancellor Rishi Sunak. However, now Prime Minister Sunak told reporters at the recent G20 summit in Delhi that the triple lock remains.
As an aside, and with regards to the income tax threshold remaining frozen at £12,570 until 2028, if pensions do rise next April under the triple lock then this could drag more than half a million more pensioners into paying income tax on their state pension. HMRC statistics show that the number of pensioners paying income tax increased from 7.73m to 8.5m between 2022/23 and 2023/24.
Spending commitments
The government also faces other spending commitments.
There have been media reports of school roofs crumbling and a shortage of teachers in the classroom. In addition, there is increasing demand for GP appointments, other NHS services and social care. And there are massive spending commitments to deliver on climate change and housebuilding. All of this creates a spending headache for the Chancellor of whichever party is in power.
As we become aware of any specific proposals from the Chancellor, we will seek to gauge their impact ahead of the Autumn Statement.
Legislation Day / consultations
Following the Spring 2023 Budget, the so-called "Legislation Day" took place on 18 July 2023, with the publication by the government of draft legislation for the next Finance Bill. This included draft rules for a single Research & Development (R&D) tax relief system.
Stamp Duty on shares: on 14 September 2023, HMRC published draft legislation (for inclusion in Finance Bill 2024) to preserve the current position where no stamp tax is charged on share issues of UK shares and securities to a depositary or a clearance service operator or their nominees.
Off-Payroll: a consultation launched by HMRC after the Spring 2023 Budget concerned the eradication of double taxation under the Off-Payroll (IR35) rules. Currently, HMRC accumulates more tax than required as it neglects to credit the tax already settled by a contractor when demanding tax from a business. If rumours in the media are correct, such a removal of double taxation would be welcomed by the contracting industry, and an announcement on this in the Autumn Statement appears likely.
Further information
If you would like to discuss how tax policy may affect you and/or your business, please contact your usual Bishop Fleming advisor.
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[Gary Mackley-Smith]
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