Sam Bromley
The Chancellor, Jeremy Hunt, will deliver his Autumn Statement to Parliament later this month, on Wednesday, 22 November. He is expected to announce new measures around taxes and spending that could affect your household finances.
Two economic forecasts are required by law each financial year, but the frequent changes that result have been criticised. In an article for The Times, Paul Johnson, director at the Institute for Fiscal Studies (IFS), wrote that two fiscal statements a year create an “over-proliferation of measures, generating instability and confusion”.
For its part, a spokesperson for HM Treasury said in an email to NerdWallet that the forecasts “allow the government to deliver its policy objectives and respond to fast-changing circumstances”.
So it’s business as usual this autumn, and you should also look out for more announcements in the spring, which generally happen in March before the start of the new tax year.
What might be in the Autumn Statement?
Tax cuts
The Prime Minister has signalled that there won’t be any tax cuts for the foreseeable future, but the Chancellor is still facing calls from within his party to slash taxes.
In response to fears that taxes will remain high, The Growth Commission, an independent group of international economists, plans to challenge the Autumn Statement by publishing its own growth report on 14 November, which is expected to recommend tax cuts. The commission was set up in July by former prime minister Liz Truss, though she plays no active part in it.
Adam Corlett, principal economist at the Resolution Foundation, an independent think tank, said in an email to NerdWallet: “Given the impact of ongoing tax threshold freezes on lower-income workers and pensioners, it would be perverse for the government to propose regressive election giveaways, such as cuts to inheritance tax or income tax rates.”
The government has frozen income tax thresholds until 2028, which means the amount you can earn before you start paying tax will remain at £12,570 until then. The higher-rate threshold has also been frozen at £50,271 as its starting point:
| Band | Taxable income | Tax rate |
|---|---|---|
| Personal allowance | up to £12,570 | 0% |
| Basic rate | £12,571 to £50,270 | 20% |
| Higher rate | £50,271 to £125,140 | 40% |
| Additional rate | over £125,140 | 45% |
Because the thresholds are frozen, if your earnings increase over the next few years, you could find yourself tipping into a higher band and paying more tax, particularly while wage growth in the UK remains strong.
According to the latest figures from the Office for National Statistics (ONS), annual growth in regular pay, which excludes bonuses, was 7.8% in June to August 2023, “one of the highest regular annual growth rates since comparable records began in 2001”.
In its Green Budget report published last month, the Institute for Fiscal Studies said that because of the freeze, the share of adults paying income tax will increase to above 66% by 2026-27, “a level that has only been seen once before” (in 2007-08).
Could Hunt bring forward the end of the freeze, or abolish it altogether, without it being seen as a cut? Sarah Coles, head of personal finance at Hargreaves Lansdown, thinks it’s unlikely.
She emailed NerdWallet to say that while bringing forward the end of the freeze would make a “big difference to taxpayers who are already carrying a huge tax burden”, the extra tax has already been factored into his calculations.
“If he axed a couple of years of the freeze, he may want to announce spending cuts or more taxes elsewhere to make up for it. It could end up damaging sentiment rather than improving it. So he might just decide to sit on the stealth tax and take advantage of higher inflation as we run up to the next election,” she added.
Changes to ISAs
An individual savings account (ISA) lets you lock away up to £20,000 a year tax free. You can hold your ISA savings in different ‘tax-free wrappers’, such as cash and stocks and shares. But it’s partly because of the range of wrappers available that the Treasury is rumoured to be updating the scheme.
Jason Hollands, managing director at wealth management firm Evelyn Partners, said in an email to NerdWallet that officials have reportedly been speaking to financial services providers.
“‘Simplification’ may turn out to be code for scrapping spin-offs of the ISA brand, such as the Innovative Finance ISA – which has had poor take-up – or the Lifetime ISA.”
Hollands also mentioned that because the Financial Conduct Authority is concerned that too many people are holding excess cash, “missing out” on potential returns available over the longer term from investing, “it is possible changes to ISAs could be aimed at driving more cash into investments”.
This hints at another rumoured announcement – an additional ISA allowance of £5,000 on top of the existing £20,000 that can only be used to invest in UK companies.
While agreeing that more tax-free savings is always a “good thing”, Hollands is sceptical. “The extra allowance would logically only be used by investors who are able to make full use of their main core ISA. That would narrow the number of people down considerably, as only 15% of ISA subscriptions are made for the full £20,000 and, bear in mind, many of these will be cash ISAs, not invested in stocks and shares.”
Considering this, look out for tweaks to ISAs on 22 November rather than a radical shake-up.
A rise in the state pension
The ‘triple lock’ means that the state pension increases each year by either average earnings growth, CPI inflation, or 2.5% – whichever is highest.
Under this system, it is set to increase by average earnings growth in April 2024, which was 8.5% from May to July 2023.
But there are question marks over whether the government will stick with the triple lock or opt for a lower figure. According to the Financial Times, the government is considering using the 7.8% ‘average growth in regular pay’ figure, which excludes bonuses.
The higher 8.5% figure includes bonuses, a rate which the ONS says has been affected by payments made to NHS and civil servants in June and July 2023, to help settle pay disputes.
Support for first-time buyers
The government introduced the mortgage guarantee scheme in 2021 to help first-time buyers and existing homeowners secure a mortgage with just a 5% deposit.
The scheme is due to end on 31 December 2023, but The Sunday Times reports that the Chancellor may be considering extending it by another year.
The newspaper also reports that the government is rumoured to be looking at tweaking ISAs to help first-time buyers. For example, when first-time buyers use a Lifetime ISA to save for a property, they’re currently limited to homes worth £450,000 or less. The Chancellor may consider increasing this limit.
An increase in the national minimum wage
During the Conservative party conference in October, Hunt committed to increasing the National Living Wage to over £11 an hour from April 2024. It is likely that this will be formally announced in his Autumn Statement.
The National Living Wage means that people who are 23 and over and not in the first year of an apprenticeship are entitled to a minimum hourly wage – currently £10.42 an hour.
Stricter rules for those out of work
The Chancellor also said at the 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.” The Autumn Statement may include further details about this.
Dr Sarah Hughes, chief executive at mental health charity Mind, said in a press release: “People do not choose to become ill. They do not want to need benefits. But this is the reality for people, compounded by decades of underfunding of mental health services.
“This is not the time to punish people with mental health problems; it’s time to invest in a fit for purpose welfare system. There is no evidence that sanctions get people into work, but there is plenty of evidence they harm people’s mental health.”
Expect more rumours…
With the Autumn Statement still three weeks away, you’ll likely see further predictions in the lead-up to the Chancellor’s announcement.
We’ll be covering the Autumn Statement and analysing what it means for you and your money, so save the date and check back for our in-depth guide after the Chancellor’s statement on 22 November.
Image source: Getty Images
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