AS the UK eagerly awaits the Chancellor’s Autumn Statement, businesses and individuals brace themselves for potential changes in government spending and tax policies. Against a challenging economic backdrop, including weak growth, soaring inflation, and a historically high tax burden, expectations and concerns are running high.
The Chancellor, Jeremy Hunt, faces a delicate balancing act, with calls for tax cuts gaining momentum, especially after data revealed borrowing in the financial year to September 2023 was nearly £20 billion below the Office for Budget Responsibility’s forecast.
Becky Bowness, Head of Tax at Armstrong Watson, noted, “The Chancellor’s additional fiscal headroom may offer some options. Still, the focus remains on tackling inflation, making it unlikely for income tax thresholds and allowances to be unfrozen. Although this move could benefit working families, it might exacerbate inflation, currently at 4.6%, functioning as a ‘stealth tax’ on household incomes.”
Speculation abounds regarding a potential shake-up of Inheritance Tax (IHT). Justin Rourke, Head of Advice at Armstrong Watson Financial Planning and Wealth Management, anticipates a signal of future change rather than an immediate adjustment, such as an IHT rate reduction or the eventual abolishment of IHT.
An ISA reform is also on the horizon, offering a potential relief for savers and investors. Justin stated, “Updating the ISA would resonate well with savers and investors, counterbalancing the stricter Capital Gains Tax regime for personal investors in recent years.”
The Chancellor’s emphasis on fostering business growth might lead to measures like extending full expensing tax relief for companies. While initial discussions hinted at making this relief permanent, an extension beyond the original March 2026 deadline seems more plausible at this stage.
An update on the consultation to merge the Research and Development (R&D) tax relief scheme for small and medium-sized businesses with R&D expenditure credit (RDEC) could align the new scheme more closely with the large company RDEC scheme, potentially impacting SME businesses currently claiming R&D.
Amid uncertainties, many businesses are hopeful for an extension of support measures for energy and business rates relief. With support set to end in March and April 2024, respectively, the absence of extensions could pose challenges, particularly for sectors facing increased costs.
Becky expressed concern, stating, “Without an extension to support measures, certain sectors may face significant challenges next year, struggling with heightened costs. Additionally, the impending rise in the National Minimum Wage in April could further increase employers’ wage bills.”
While significant tax announcements might not be expected in the Autumn Statement, the potential implications of certain announcements, or their absence, could significantly impact specific businesses and individuals.
Armstrong Watson’s experts plan to dissect the Chancellor’s announcements in a dedicated webinar on Thursday, November 23, 2023.
