Autumn Statement 2023 predictions
16th November 2023
On Wednesday 22 November, the Chancellor, Jeremy Hunt, will deliver the Autumn Statement 2023, where he will set out the Government’s tax and spending plans, and share a fiscal forecast. Here, we share an overview of our key predictions.
Setting the scene
With a General Election looming – a General Election is required to be announced by 17 December 2024 – and a turbulent UK economy, this Autumn Statement is likely to be an interesting one. It offers the Chancellor a chance to showcase his commitment to bolstering the economy and could serve as one of the final opportunities for the Conservatives to persuade sceptical supporters that it is the most suitable party to guide the UK.
With UK Gross Domestic Product (GDP) remaining flat, the National Institute of Economic and Social Research (NIESR) predicts that although the UK will avoid a recession in 2023, there is still a chance of a recession by the end of 2024.
However, inflation is falling and the Centre for Economics and Business Research (CEBR) predicts that interest rates are close to peaking, potentially providing some ‘light at the end of the tunnel’.
That being said, it goes without saying that the current economic climate provides a difficult backdrop for the Chancellor. Here’s what we think will be announced in the Autumn Statement:
Tax cuts “virtually impossible”
Undoubtedly, many businesses, industry leaders and households will be hoping that the Chancellor announces tax cuts in his speech – however, it’s unlikely that this will happen as the Chancellor has previously warned that tax cuts are “virtually impossible” and that “the best tax cut right now is a cut in inflation”, in line with the Prime Minister’s pledge to halve inflation this year.
Given that a General Election is approaching, we would imagine that any tax cuts may be delayed until the Spring Budget 2024 to ensure they pack a punch with voters.
Could inheritance tax be abolished?
Whilst there have been rumours that the government will abolish inheritance tax (IHT), it’s likely that there would need to be some sort of replacement to plug the gap, given that it raises such a hefty amount for the public purse (IHT is expected to raise £7.2 billion in 2023/24).
Instead, the government may opt for a reform of IHT, rather than a complete abolition. We may see a reduction of the current rate of 40%, an increase in the joint allowance for married couples or a scrapping of the residential nil rate band, for example. Though would such changes be left for the Conservative’s manifesto for the next General Election?
Tax Partner, Mark Hook, comments, “It may be prudent for individuals to review their inheritance tax planning now, rather than waiting for potential future changes.”
Will ISAs be simplified?
There has been talk that there will be a big shake up to Individual Savings Accounts (ISAs) to make it easier for individuals to invest their money. At the moment, there are six types of ISA products, each with different rules.
The reforms could see an increase in the annual ISA tax-free allowance from £20,000 to £30,000. We haven’t seen an increase in the annual ISA allowance since April 2017, more than 6.5 years ago, so a boost would be welcome – although we’re hearing that the increase could be restricted to investing in UK companies only.
There are also rumours circulating that savers may be able to merge cash savings and stock market investments to be held in a single ISA (currently, they must be held separately). But would this overcomplicate things rather than simplify the ISA regime?
Research & Development tax reliefs
We know that new rules are coming into force in April 2024 (announced in the Spring Budget 2023), but could there be more changes on the table for Research & Development (R&D)?
Following the publication of draft legislation for technical consultation, we could see the SME and Large RDEC schemes combined into a single, simplified RDEC based scheme. This would be an Above the Line (ATL) income source within the company accounts, rather than a corporation tax computation adjustment – and thus, it may drive the R&D process to be undertaken in line with the preparation of the accounts.
State pension triple lock
Rumours are circulating that the government may amend the ‘triple lock’ which has been in place since 2010. The triple lock guarantees that the State Pension will be boosted by the higher of CPI inflation in September 2023, average earnings growth (from the period between May to July 2023), or 2.5%.
Based on the latest figures, we could see a rise of 8.5% from April 2024, propelling the full State Pension to over £11,500 a year. However, due to the current state of the country’s finances, there are questions around the affordability of the triple lock. So, it may be that the government decides to exclude bonuses from its calculations which would lower this figure to 7.8% – a move that could save the government around £1bn, but may leave pensioners unhappy.
Capital Gains Tax
The Chancellor previously announced that the annual exemption for Capital Gains Tax (CGT) is to be reduced to £3,000 per individual from 6 April 2024. This perhaps suggest that there could be further moves to align the rates of CGT with Income Tax.
There is a general feeling however that with the election on the horizon, more significant changes to CGT would lose some key voters.
Extension of business investment tax reliefs
With the Enterprise Investment Scheme (EIS) and Venture Capital Trust (VCT) relief – both schemes that encourage business investment – set to end on 6 April 2025, could the Chancellor announce plans to extend these reliefs?
Environmental taxes and green investments
With ambitious targets to reach net zero, we may see the Chancellor announce additional measures to support these targets. These could be in the form of environmental taxes and green investment schemes.
There have been reports of a ‘green’ Stamp Duty Land Tax (SDLT) measure, which would provide an SDLT rebate to buyers who successful improve the energy efficiency of their home within two years of its purchase.
What we’re unlikely to see announced
Rise in fuel duty
Fuel duty hasn’t seen an increase in 13 years. In fact, in March 2022 it was subject to a cut of 5p per litre, which was set to last for 12 months. However, in the Spring Budget, the Chancellor announced that it would maintain the 5p cut for another 12 months until March 2024.
With an election looming, and the political sensitivity of fuel duty hikes, it is likely that fuel duty won’t be a topic of discussion for the Chancellor.
With significant announcements made in the Spring Budget, which are due to be phased in from April 2024, it’s unlikely that we’ll see any additional announcements on childcare schemes.
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