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From a private client perspective, the headline news was the 2% reduction in the rate of employees' National Insurance, and smaller 1% reduction for the self-employed.
22 November 2023
Peter Ball reviews the 2023 Autumn Statement from a private client perspective.
From a private client perspective, the headline news was the 2% reduction in the rate of employees National Insurance, and smaller 1% reduction for the self-employed.
With a General Election taking place no later than 28 January 2025, it had been widely expected that the Government would look to reduce income tax rates before an election, with the consensus being that the reduction would probably be announced in a Budget next Spring.
The freezing and reduction of income tax bands from 2021/22 through to 2027/28, combined with the impact of inflation, and the Chancellor leaving Government departmental spending broadly unchanged, has given him approximately £27bn of headroom to make changes now.
Will we also see more tax reductions in the Spring?
In recent Budgets and Autumn Statements we have had some fairly extensive advance market testing of possible tax changes.
For this Autumn Statement we had speculation on abolishing or reducing the rate of inheritance tax, and possible changes to stamp duty land tax.
It turned out no changes were made to either. In fact, we will have a stamp duty increase on 1 April 2025, when the residential property thresholds will fall back down to their levels from before Kwasi Kwarteng’s mini-budget in September 2022.
Some of the other private client related announcements made by the Chancellor were:
By way of a reminder, there were a few announcements from previous Budgets which have yet to come into force, including:
As mentioned, the next General Election will need to be held by 28 January 2025 at the latest. It is unlikely that it will be held this late, given it would involve campaigning over Christmas next year. The last time we had a General Election in January was in 1910.
Ten of the last eleven General Elections have been held in the spring or early summer and 6 were held jointly with local elections.
Spring election?
In 2024, local and mayoral elections will take place on 2 May 2024, which makes it a more likely date. If this were the case, Parliament would need to be dissolved in late March, giving the statutory 25 working days between dissolving Parliament, and holding the election.
This would give time for a Spring Budget. However, Rishi Sunak will have only been Prime Minister for 18 months by then.
Autumn election?
An Autumn General Election is another possibility. It would give the Prime Minister more time to deliver on his pledges. He would also have more options as to dates, compared to the Spring.
The bookies have been indicating an Autumn General Election is the most likely.
However, the Office for Budget Responsibility today lowered its predicted growth to 0.7% in 2024 (down from 1.8%) and 1.4% in 2025 (down from 2.25%). The forecasts for 2023 have, however, improved. Last Autumn the OBR predicted a fall in GDP of 1.4% in 2023, whereas now it predicts growth of 0.6% in 2023.
With Labour currently predicted to form a majority Government following the next General Election, it is helpful to look at their tax policies and views over the coming months.
However, it appears unlikely that Labour will be planning to increase income taxes for ‘working people’.
It also appears that increases in capital gains tax rates aren’t high on their agenda, following comments from Rachel Reeves, the shadow Chancellor that that ‘preferential tax treatment’ for wealth generators was an important element in growing an economy, and that a ‘wholesale equalisation’ of income tax and capital gains tax could hurt investment.
Labour have also said that they have no plans to change inheritance tax, which isn’t a commitment not to change it. They have, however, ruled out introducing a wealth tax.
Two areas where there has been focus from Labour has been in relation to abolishing the non-domicile status and in starting to charge VAT on private school fees.
As we move closer to 2024, which is widely expected to be election year, we will keep a close watch on how the political parties refine their tax policies.
If you would like to discuss the implications for you of the Autumn Statement or how a change of government could affect your financial position, please contact Peter or a member of our Tax Team for a conversation.
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