On 22 November 2023 Jeremy Hunt will deliver his next Budget Statement. What’s likely to be announced? Will there be any surprises? Peter Webb, our Head of Tax Advisory speculates on the possibilities.
Background to the Autumn Budget Statement
It’s likely that Jeremy Hunt will begin by sharing an update on the state of the economy. He will, undoubtedly, focus on the positive impact his policies have had so far and reassert how they’ll continue to improve the UK’s position in the future.
According to KPMG the UK economy is experiencing renewed signs of stress. While there’s little worry of a deep recession, interest rates are likely to remain high, inflation remains high, and the UK housing market looks to be falling. Consumers, because of these economic conditions, are simply not spending as much.
When it comes to debt, the government borrowed less than expected in the first half of 2023/24; taxpayers are paying more and government spend is therefore reduced. Yet the hefty bill left by Covid still looms, with tax rates and tax bands set to remain frozen until at least 2028. With wage growth increasing this means the percentage of salaries being paid to the UK tax authorities will continue increasing every year.
Overriding all other considerations is the prospect of the next general election, likely to be held next Autumn. Whatever else is announced it won’t be surprising to see some headline grabbing ‘feel good’ announcements as the Conservatives prepare for the next election.
What might be announced?
There are rumours that the rules for Individual Savings Accounts (ISAs) could be simplified. ISAs generally allow adults to save GBP20,000 a year into an investment wrapper that protects returns from Income Tax and Capital Gains Tax. There are various types of ISA’s (such as Lifetime ISAs and Innovative Finance ISAs) with complicated rules. Some of these have seen little take up and simplifying the rules would be welcomed. The last time ISA allowances increased was 6 April 2017; high inflation is reducing the value of that allowance and an increase feels long overdue.
The cost of the triple lock on state pensions continues to cause concern. The triple lock guarantees that the state pension will increase by average earnings growth, CPI inflation, or 2.5% – whichever is greater. Inflation and earnings growth are high and the triple lock increase will be a significant drain on public finances. It’s politically difficult to abandon the triple lock, and despite rumours that change would come, the government shied away from abandoning it last year. However, there may be a way to retain the triple lock but update the rules for how average earnings growth and CPI inflation is calculated. One option is to exclude bonuses when calculating average earnings.
In 2021 a scheme to help first-time buyers and existing homeowners secure a mortgage with just a 5% deposit was introduced. This scheme is due to end at the end of the year but it’s reported that the government is considering extending it until 31 December 2024.
How does the government raise revenue?
Revenue is created by the government increasing taxes and decreasing spending. In the current economic climate it’s already common knowledge that the amount of tax being paid is set to increase over the coming years. Jeremy Hunt also told the Conservative party conference that the government will “look at the way the sanctions regime works. It isn’t fair that someone who refuses to look seriously for a job gets the same as someone trying their best.” This is a clear indication that the government will review – and likely reduce – welfare spending too.
It’s always interesting to speculate on what might happen, and there’s every chance that there will be some surprising rabbits pulled out of Jeremy Hunt’s hat. We’ll be analysing the Autumn Budget Statement on 22 November to consider what this means for you and your finances. Keep an eye on our website, or Facebook and LinkedIn channels, to stay up to date.