What to expect from the Autumn Statement on November 17th

With less than a week to go until Jeremy Hunt reveals his first Autumn Statement as chancellor, we take a look at what might be announced.

Difficult decisions ahead

The Chancellor will deliver his Autumn Statement on Thursday, 17 November. This replaces the “medium-term fiscal plan” that was supposed to be announced on 31 October.

Jeremy Hunt has said that he is prepared to make “difficult decisions” on tax and spending to repair the country’s £50bn fiscal black hole as well as keeping downward pressure on inflation.

Within just days of becoming chancellor, Mr Hunt axed policies designed to support households struggling with the cost of living crisis – he scaled back the Energy Price Guarantee, shelved plans to cut a penny off the basic rate of income tax and reversed the 1.25% cut to dividend tax.

After the Bank of England raised interest rates to 3% last week, Mr Hunt reiterated his warning that there was more bad news to come, saying :“Sound money and a stable economy are the best ways to deliver lower mortgage rates, more jobs and long-term growth. However, there are no easy options and we will need to take difficult decisions on tax and spending to get there.”

What might we expect?

The Chancellor is widely expected to turn his Autumn Statement into a “Frozen Statement”, with a range of tax allowances frozen as part of a stealth tax raid rather than raising taxes or cutting spending but until we hear from Mr Hunt next week we can only speculate as to what might be announced.

Whatever is announced, we aren’t expecting any giveaways and what is clear is that the tone under Jeremy Hunt, compared to Kwasi Kwarteng is very different.

Income tax thresholds might be frozen for even longer

Income tax thresholds are already frozen until 2026, but Mr Hunt could announce an extension to this, possibly until 2028. Essentially, this is a stealth tax that would drag millions of people into the income tax system for the first time, or into higher tax bands.

National Insurance could be tweaked

The government reversed the 1.25% increase in NICs, introduced by Mr Sunak when he was chancellor, on 6 November.

But Mr Hunt might be tempted to look again at NICs as a way of raising money. It might be that the 1.25% reversal is scaled back so that it only applies to basic-rate taxpayers, or the chancellor could go further and apply National Insurance to rental profits and capital gains too.

Capital gains tax allowances might be frozen or lowered

CGT is currently charged at 10% and 20% – plus an additional 8% if the gain is from residential property, but the OTS has previously recommended aligning the rates with income tax.

There are rumours that the CGT annual exemption – currently £12,300 – will be frozen instead of raising in line with inflation.

If we do see a tougher CGT regime announced next week, it will reinforce the case for utilising ISAs and pensions, as gains within these are not taxable.

Investment Zones

Whether the proposed Investment Zones , announced in September go ahead as planned remains to be seen, especially given their projected £12bn a year price tag. If they survive then it seems probable that a lighter version will go ahead with the tax reliefs available scaled back to reduce the cost.

Inheritance tax threshold could be frozen

There is speculation the chancellor will extend a freeze on the IHT threshold until April 2028 in his Autumn Statement.

Rishi Sunak previously froze the threshold at £325,000 until April 2026 when he was chancellor, and Mr Hunt is expected to prolong the freeze for another two years.

This would mean that the tax-free allowance will have remained the same since 2009 rather than being increased in line with inflation.

It’s estimated that freezing the threshold could raise an extra £1bn in taxes, due to more estates being dragged into the IHT net.

Pension tax breaks could be frozen or cut

According to a report in The Telegraph, the pension lifetime allowance is set to be frozen for two more years, until 2027. The lifetime allowance refers to the amount that savers can accumulate in pension pots during their lifetime without being hit with a penalty when they come to take the money out.

Currently this stands at £1,073,100. Savings over that limit are taxed at 55% if the money is taken as a lump sum, or at 25% plus the individual’s marginal rate of income tax if withdrawn gradually.

If the freeze is extended it is estimate that an additional two million pension savers will be affected.

State pension triple lock

The triple lock refers to the guarantee that the state pension will increase each year in line with whichever is highest out of inflation, wages or 2.5%. This is currently suspended until April 2023, but there is speculation that the one-year suspension might be extended, or that the triple lock could be permanently axed.

Pensioners received a 3.1% annual increase in April 2022. In April 2023, if the triple lock is restored as planned, they could see their pay out rise by 10.1%, due to soaring inflation.

Whilst the triple lock is a key Conservative manifesto pledge, and one that Truss and Kwarteng had committed to, Jeremy Hunt has offered no such assurance.

Benefit increases to be revealed

Benefit payments usually rise every April. Liz Truss previously failed to commit to increasing benefits in line with inflation. Capping benefit increases would be an easy way to raise revenue, but it’s rumoured that in the upcoming Autumn Statement Mr Hunt is said to be planning to stick with an inflation-linked rise, to ensure the government is seen as “fair and compassionate”.

What do we know is surviving?

The Chancellor has confirmed that the small measures in the mini-budget to make the Company Share Option Scheme and the Seed Enterprise Investment Scheme more attractive will continue and the current EIS and VCT schemes will have a longer lifespan. The capital allowances 100% Annual Investment Allowance will also continue at £1m a year.

Keeping you informed

As always the team here will be listening closely when Jeremy Hunt makes his autumn statement next Thursday and we will be keeping you informed about key announcements and their likely impact as they happen. If you have any queries, please get in touch.