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The latest Autumn Statement rumours and predictions

The latest Autumn Statement rumours and predictions
Emma Lunn
Written By:
Emma Lunn
Posted:
16/11/2023
Updated:
27/11/2023

With just a week to go until Jeremy Hunt’s Autumn Statement, we’ve taken the rumours and predictions doing the rounds.

The Autumn Statement, probably the last before the General Election, is likely to see the Chancellor outline the Government’s plans for the economy, ISAs, pensions, inheritance tax (IHT) and taxes.

With inflation finally starting to fall, but the cost-of-living crisis rumbling on, experts are keen to offer their predictions about what will be announced in the statement on Wednesday 22 November and how this will impact people’s finances.

Tax cuts

The Autumn Statement will be heavily influenced by the latest figures from the Office for Budget Responsibility (OBR) on the nation’s finances.

The latest inflation figure of 4.6% means the Government has delivered on and surpassed its commitment to halve inflation from its end-2022 10.7% level, one of the Chancellor’s pre-requisites for considering tax cuts.

Steven Cameron, Aegon pensions director, said: “While rumoured improved fiscal headroom and the achievement of the Government’s inflation target will raise hopes of immediate tax cuts, I’d expect the Chancellor to hold back on these until his Spring Budget. While a cut in rates would be the most eye-catching, lower earners could actually benefit more from thresholds being unfrozen. Any cuts in taxes are likely to be limited to those which won’t risk recreating inflationary pressures, for example extending business reliefs or cutting inheritance tax.”

Pensions

The Autumn Statement could also include confirmation on whether the Government is honouring the state pension triple lock next April. Will the Government grant the full 8.5% increase, or seek to save some money by excluding public sector bonuses from the earnings growth figure and opt for 7.8% instead?

With inflation now sitting at 4.6%, an 8.5% increase could be more than double the ruling rate of inflation come next April.

Turning to private and workplace pensions, Hunt announced in March’s budget that the pensions lifetime allowance will be scrapped from April 2024. But there are rumours that pension savers could be forced to navigate new onerous rules in the form of a new pension ‘death tax’.

The lifetime allowance is the maximum amount you can save into a pension without having to pay an additional tax charge. It currently stands at £1,073,100 but was as high as £1.8m in 2012.

Under current rules, if you die before age 75 your beneficiaries can inherit your defined contribution pension completely tax-free if it is under your lifetime allowance. However, under the new pension tax regime it’s expected all inherited pensions taken as income will be taxed, regardless of what age you die.

Rachel Vahey, AJ Bell head of policy development, said: “This would be a massive shift in policy, backtracking on flagship reforms introduced by former chancellor George Osborne alongside the pensions freedom changes. Creating a death tax if income is taken makes little sense and may push more beneficiaries to take a lump sum when an income is more suitable for their needs.”

Reforming ISAs

There are reports that the Chancellor has been considering a variety of reforms to the ISA regime.

One idea is to allow people to pay money into more than one ISA of each type in a tax year. This change would make it easier for investors to try out different stocks and shares ISA providers, while cash savers could open multiple new ISAs as new deals become available.

Tom Selby, AJ Bell head of retirement policy, said: “This would be a helpful change but, far more importantly, it potentially paves the way for radical reform of the ISA system to make it much more flexible and customer friendly.

“If the Government brings forward a full review of ISAs, this will provide a real opportunity to develop long-term proposals centred around stripping away unnecessary complexity and creating a single, simple ‘One ISA’ product that incorporates the best features of the existing landscape.”

Some critics have called for an increase in the Lifetime ISA property purchase limit. The limit has remained at £450,000 since its launch in April 2017, but AJ Bell calculated that if it had increased in line with property prices it would now sit at more than £560,000.

There have also been calls to reduce the penalty fee if savers want to access their Lifetime ISA savings for reasons other than property purchase or retirement.

Inheritance tax

There are rumours that suggest the Chancellor could be planning to overhaul IHT, perhaps abolishing it altogether.

The Treasury collected almost £4bn in IHT revenues in the first half of the tax year, an increase of £400m compared to the same time last year. The figures mean the UK is on course to set a new record for the annual IHT bill, with the previous high set in 2022/23 at just over £7bn.

Suter said: “The Residence Nil Rate Band (RNRB), announced in 2015 but phased-in from 2017-20, allows a couple to leave a £1m estate free of inheritance tax, but only if they fit certain criteria and understand how to use it. Many people are not eligible for the RNRB, meaning they are stuck with an IHT allowance from 2009.

“In truth, the IHT threshold would be £1m in 2024 if only the government had just uprated the nil-rate band with inflation from the time Cameron and Osborne came to power over a decade ago.”

Personal savings allowance

Some experts are continuing to call on the Chancellor to end the freeze on the personal savings allowance, which has been set at the same level since 2016. A million more people are set to pay tax on cash savings interest this year alone, as a consequence of the frozen threshold, which has not been adjusted to reflect inflation and rising interest rates.

Doubling the personal savings allowance would mean that £20,000 held in a 5% savings account would not be taxed for basic and higher rate taxpayers, ending the penalty on those who have rainy day savings.