A lot can change in a year – and after the 2022 Autumn Statement promised wide ranging tax cuts, only for many of the key measures to be swiftly reversed, 2023 could well grab fewer headlines in comparison. Having said that, with this potentially being the final Autumn Statement before next year’s general election, change could be on the horizon as the Tories look to set out their stall and try to regain some ground in the polls. Whilst there has been good news in recent weeks as inflation has reduced below the 5% target set by Rishi Sunak, the government will be seeking to strike a fine balance between any measures to reduce tax and ensuring these do not reverse the progress made on inflation to date.
Dubbed by some as the “most hated tax in Britain”, rumours have been circulating of potential reform to Inheritance Tax (IHT). Whilst it was widely anticipated that it may be a focus of this week’s Autumn Statement, this appears to have been toned down and it is now likely that any changes will be in the Spring Budget – possible changes mooted include a cut to the headline rate of tax of 40% or increase to the nil rate band. Given the nil rate band has remained static at £325,000 since 2009, this measure would be particularly welcomed by those who have fallen into the IHT net due to asset value inflation over the same period.
Income Tax and NICs
Despite pressure from several senior Conservative MPs, Chancellor Jeremy Hunt had previously said that there are ‘no shortcuts to lower taxes’ and until public finances are improved, income tax rates and thresholds will likely remain at their current level.
However, the recent fall in inflation has prompted speculation that tax cuts could take place this week, given the additional financial headroom now available. Jeremy Hunt has remained tight-lipped when quizzed on any potential changes, but some sources have quoted a potential cut in rates of income tax and/or national insurance of between 1% and 2%, so watch this space for any further developments. There will be a Scottish Budget on 19 December 2023; as the devolved Scottish government have control over income tax thresholds and rates, which currently differ from the rest of the UK, it will be interesting to see if any changes to the UK rates also filter through into the Scottish Budget.
Elsewhere, a group of Conservative MPs (the ‘New Conservatives’) is lobbying for family-friendly tax reforms to be introduced. These reforms include calling for the High Income Child Benefit Charge (HICBC) to be removed, as well as permitting the personal allowance to be transferable between spouses and moving to a system of household taxation. Given the number of cases passing through the courts at present regarding the HICBC, this would certainly be a welcome move amongst families if it were included in the Autumn Statement.
Capital Gains Tax
Unlike last year, there has not been any recent publicity over proposed changes to Capital Gains Tax (CGT), following the reductions in the annual exemption in 2023/24 and 2024/25. However, with CGT rates still remaining low in comparison to income tax rates, there is scope for (albeit unpopular) changes should the Chancellor wish to raise additional tax revenue.
The New Conservative group are also calling for reforms to Business Taxes including raising the VAT threshold to £250,000 (currently £85,000) and reversing the recent IR35 reforms. However, these are not official Government policy, and the main point of contention amongst Conservative MPs is the current high level of corporation tax. Whilst this is unlikely to change, Jeremy Hunt may well extend the policy of “full expensing”, or possibly even make it permanent.
Stamp Duty Land Tax/Land & Buildings Transaction Tax
It’s difficult at times to keep track of the Stamp Duty Land Tax (SDLT)/Land & Buildings Transactions Tax (LBTT) thresholds, given the various changes which have taken place since the first wave of Covid-19. Further changes could be on the horizon, as the government seek to stimulate the housing market following the stagnation which has arisen due to increased interest rates. Given their pledge to reduce inflation, though, it is perhaps more likely that this will be considered in the Spring Budget. Whether any changes to SDLT would be replicated in the LBTT/LTT thresholds by the devolved Scottish and Welsh governments remains to be seen, given the current thresholds do differ.
Whilst tax is an ever-changing landscape, there are always opportunities to ensure your affairs are structured as efficiently as possible; and having a trusted adviser by your side who understands what these changes mean can make all the difference.
If you would like to discuss how the Autumn Statement may impact your tax planning strategy, please do not hesitate to get in touch with Tom Andrew or your usual AAB Group contact.