As Chancellor Jeremy Hunt finalizes the Autumn Statement set to be delivered next Wednesday, expectations rise regarding its potential impact on various financial aspects.
This includes taxes, pensions, inheritance, and potential reforms in savings, investments, and housing.
Tax Policy and Fiscal Drag:
While pressure mounts on Hunt to reduce taxes, there are no imminent plans for widespread tax cuts.
The focus remains on fiscal drag, as a six-year freeze on personal allowances and thresholds leads more individuals into a higher tax bracket.
The potential creation of 3.2 million new taxpayers and 2.6 million higher-rate taxpayers is a consequence of freezing thresholds until 2028.
Pension Concerns and Triple Lock:
Amidst expectations for a significant boost to the state pension next year, concerns arise that the Treasury might adjust the figure.
The triple lock, ensuring pension increases by the highest of inflation, average earnings growth, or 2.5%, may face alterations.
Speculation suggests factors like NHS bonuses could influence the adjustment, potentially impacting millions of pensioners.
Inheritance Tax Considerations:
While Hunt isn’t planning across-the-board tax cuts, there’s discussion about potential changes to inheritance tax.
Options include reducing the tax rate from 40% to 30% or exploring an increase in the threshold.
These considerations aim to address public dissatisfaction with inheritance tax and its perception as a levy on passing wealth to future generations.
Isa System Reforms:
Anticipated reforms in the Isa system may be announced, with discussions around simplification and potential changes.
Proposals include a combined cash-and-shares Isa, a new stocks and shares Isa for UK-listed companies, and possibly allowing savers to open multiple Isas of the same type in a single tax year.
The reforms aim to encourage investment and address complexities in the existing system.
Savings, Mortgages, and First-Time Buyers:
Calls to end the freeze on the personal savings allowance, potential mortgage guarantee scheme extensions, and adjustments to stamp duty thresholds for homebuyers are anticipated.
There’s also discussion about raising the limit on the Lifetime Isa to better align with rising house prices, providing relief for those saving for their first home.
Insurance Premium Tax and Small Businesses:
The Association of British Insurers advocates for a reduction in Insurance Premium Tax (IPT) to manage rising costs.
IPT currently stands at 12%, and any reduction could alleviate financial burdens on homeowners and businesses.
Additionally, small businesses may witness tax cuts, possibly through the extension of the ‘full expensing’ capital allowance scheme, fostering economic growth.
As expectations build for Chancellor Hunt’s Autumn Statement, the proposed measures highlight a delicate balance between economic stimulus, public sentiment, and the need for financial sustainability.
The impact of potential reforms will be closely scrutinized in the context of the broader economic landscape.