Chancellor Jeremy Hunt is mulling over cuts to income tax and National Insurance ahead of Wednesday’s Autumn Statement.
In media interviews over the weekend, Hunt refused to rule out cutting income tax. He told the BBC’s Sunday with Laura Kuenssberg programme, his speech would focus on “removing barriers to growth”.
Hunt told the BBC he wanted to put the UK on “the path to lower taxes” but would “only do so in a responsible way” that did not “sacrifice the progress on inflation”.
Hunt also told Sky News he wanted to set out a “path” to reducing overall taxation.
The over-riding argument for making changes to income tax or National Insurance is that this would help people with the big challenges Brits are facing at the moment – the fact that their financial resilience has taken a beating from the rising cost of living.
Income tax thresholds were frozen in 2021/22 and are set to remain so until 2028. But the freezing of the thresholds has dragged 1.6 million people into paying higher rate tax and 2.2 million into paying basic rate tax.
Since 2022, sky-high inflation has made a massive impact on household budgets, leading to rumours that tax rates or thresholds might be revised.
However, Hunt also remarked that “if you believe the papers there won’t be any taxes left,” while earlier this month he described tax cuts as “virtually impossible” given the state of the economy.
There have also been several reports that the chancellor plans to reduce inheritance tax (IHT). Last week The Times suggested that Hunt is considering cutting the headline rate of IHT from 40% to 30% or 20%, with rumours of a pledge to abolish the tax eventually. But this would have minimal impact on his plan to promote economic growth.
In addition, IHT only affects a small number of families. According to Institute for Fiscal Studies (IFS) analysis of HMRC data, less than 4% of deaths result in IHT being paid.
‘A bumper Autumn Statement’
Sarah Coles, head of personal finance at Hargreaves Lansdown, said: “The pre-Autumn Statement weekend offered fewer pre-announcements than we’ve been used to, but a smorgasbord of rumours and leaks has been left on the table for us to pick over in the coming days, stoking rumours of a bumper Autumn Statement.
“The chancellor Jeremy Hunt hasn’t ruled out any of the rumoured potential tax cuts and has left tantalising crumbs of clues that he will be focused on growth, and sensible about keeping inflation under control. In addition to tax measures, we are also expecting announcements to boost investment in equities, and reforms for both ISAs and pensions. It looks like there could be plenty of positive change in this statement, but at this stage the Treasury is always unlikely to be emphasising the bad news.”
