Date15 Nov 2023
As with any Government Budget or Fiscal Statement announcement, rumours around what will be included have been swirling for a number of weeks. The UK’s economy continues to struggle and there’s a significant tax burden on the shoulders of both businesses and individuals.
Jeremy Hunt undoubtedly faces a tough task but there have been some positives recently which may lead to surprise tax breaks being announced, despite the Chancellor being adamant that any cuts are “virtually impossible” in the lead up to next week.
According to recent figures, inflation has somewhat surprisingly dropped to 4.6% in October, which marks a drop substantial fall from September’s figure of 6.7%. October’s CPI index is the lowest level for two years and Jeremy Hunt had stated that “we are beginning to win the battle against inflation”. It's the largest drop of its kind since 1992 (when Whitney Houston’s I Will Always Love You was the best-selling single), at -2.1%. The only other drop similar to that was in 1993, at -2.03%.
To coincide with this, it is also expected that interest rates will start to fall from next year, in another positive step for an economy that has been on the edge of a recession for some time.
Ahead of next week’s Autumn Statement, we look at what should be on the agenda below.
The full expensing scheme was announced in 2023’s Spring Budget as effectively a three-year programme to incentivise business investment. It offers the ability to accelerate a number of tax savings on qualifying expenditure to help cashflow, by providing a significant amount of tax relief in year one.
While the three-year timeframe offers a degree of certainty from April 2023 until 31 March 2026, the Autumn Statement may present an opportunity for the Chancellor to make this permanent and offer businesses a longer term incentive and stability, plus provide more confidence in UK PLC for foreign investors looking to invest in the UK.
HMRC has come under a lot of close scrutiny around service levels in recent months and it’d be interesting to see if more investment is provided to support taxpayers, although this is not likely based on budget constraints. However, the Autumn Statement does provide an opportunity for more legislation to tackle tax avoidance.
There have been various issues reported recently in the press, for example Employee Ownership Trusts (EOTs) and Research & Development (R&D), where there is perceived abuse of the tax system and next week we may hear further targeted measures on these areas.
As we likely move into an election year, talk is unsurprisingly turning to party pledges. One of the pledges on the cards is an inheritance tax cut which would have significant impact for many individuals.
Despite high levels of inflation for a sustained period of time, the threshold for IHT has been frozen at £325,000 until April 2028. By this point, it will have been at the same level for seven years, leading to a regularly increasing number of people falling into its scope.
For estates worth over this £325,000 threshold, there’s a 40% tax-take in normal circumstances. Although the threshold does increase to £500,000 when a home is given away to children or grandchildren.
There have been persistent calls for Government intervention and a raising of the thresholds, or even an abolishment altogether. It’ll be interesting to see whether any announcement comes out on this next week or if any changes would be reserved for next year. Regardless of when, it must be a priority.
Following a Government consultation, a new single Research & Development (R&D) scheme is scheduled to be implemented from April 2024. This is yet to be set in stone, so it may be that an update is provided next Wednesday.
A key ask for businesses in relation to R&D would be certainty. What we’re seeing in practice is businesses who should be claiming R&D are not, given how complicated the rules have become, which goes against the intention of the key Government policy to support innovation.
Also, while a move to a single and simplified scheme would be desirable, there needs to be sufficient generosity to drive productivity growth.
We know clients are already concerned about the impact of the next general election and the uncertainty that this now brings around the tax landscape. With that and other recent economic and political turbulence, the Chancellor might use the Autumn Statement as an opportunity to demonstrate long-term stability and offer short-term incentives for businesses to help them through what could be a difficult start for 2024.
Councils across the UK continue to face financial pressures and the Local Government Association (LGA) has called for direct action by the Chancellor.
Additional funding was announced, as part of the levelling up agenda, in last year’s Autumn Statement but LGA maintains the following action is crucial:
We continue to support our entrepreneurial clients across the UK on tax matters. Please join our tax specialists as they explore the key announcements after the dust has settled and the impact these may have for individuals and the UK’s business community.
There will also be a focus on tips for efficient, effective and strategic tax planning for the rest of the tax year and beyond.