How might the Autumn Statement 2023 impact you and your business?

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The Government’s spending plans and changes to tax policy for the year ahead will soon be revealed in the Autumn Statement, and against a backdrop of weak economic growth, high inflation, high levels of public debt and the highest tax burden since World War Two - whilst we are also bordering on a recession - the Chancellor is in a difficult position.  

Our experts will be analysing the impact of the Chancellor’s announcements in a special webinar on Thursday, November 2023, but until then, here is a brief overview of what we anticipate might happen.

Jeremy Hunt has come under increasing pressure to announce tax cuts, particularly after official figures showed borrowing in the financial year to September 2023 was almost £20bn lower than forecast by the Office for Budget Responsibility (OBR).

It may be that this additional fiscal headroom gives the Chancellor some options, however, his focus is still on tackling inflation, which is reducing but not at the rate it was expected to.

For this reason, it is unlikely that the Chancellor will unfreeze income tax thresholds and allowances (currently frozen until April 2028) as, while this would help working families, it would lead to an increase in inflation, which has just fallen sharply to its lowest level in two years (4.6%). This “stealth tax” on household incomes drags more and more taxpayers into higher tax brackets.  

Personal tax

While there has been much speculation about a shake-up of Inheritance Tax (IHT), politically, the Chancellor needs to get some disenfranchised Conservatives back on side so there may be at least an announcement on IHT.

This view is echoed by Armstrong Watson Financial Planning and Wealth Management’s Head of Advice, Justin Rourke, who doesn’t expect a change now, but rather some signposting of future change - either an IHT rate reduction or perhaps the planned abolishment of IHT altogether.

Meanwhile, he said a potential ISA reform is expected, with stage one to simplify and launch the ‘one ISA’ concept (cash and stocks and shares in one ISA together) and stage two to raise the annual input allowance from £20,000 to £25,000. Justin explains that this would be a popular move with savers and investors as the ISA has been left behind in recent years and it would help to offset the more stringent Capital Gains Tax regime for personal investors.

When it comes to pensions, Mr Hunt announced the abolishment of the Lifetime Allowance (LTA) in the Spring Budget as a two-stage process, with the charge set to be completely removed by April 2024.  However, with little time to legislate before the new year, it might be that this is delayed and could cause some confusion for savers who are approaching the LTA threshold.

There is also speculation as to the sustainability of the State Pension triple lock – the system used by the Government to determine the annual State Pension rise. The basic and new State Pension currently rise in line with the highest of three measures: inflation, earnings growth or 2.5%, however will the Government opt to use the lowest of these measures going forward? Justin suspects with a General Election looming this is likely to remain unaltered for now.

Justin says: “The Chancellor will draw attention to falling inflation as a positive, and a hope that 2024 will see it return nearer to the target figure and alleviate interest rate pressure. This will be framed in the context of staying the course, not being out of the woods and the need to make sure that any change is measured and considered.”

Investment markets

In terms of investment markets, our Future Money Fund Manager, Richard Cole, says the markets are currently focused on inflation and the path of interest rates.  Developments in the US hold the most weight, but politics in the UK are capable of causing shifts in investor confidence, as we discovered at the expense of Liz Truss and Kwasi Kwarteng’s controversial “mini-budget” of September 2022 and the surge of borrowing costs that followed. 

Richard says: “With Jeremy Hunt having followed a much more conventional path since becoming Chancellor, it would be a surprise if he took such a cavalier turn with the Autumn Statement, nonetheless, tax cuts are a possibility for the day, given an economy that is lacking in growth and a Conservative party which is trailing in the polls with a General Election approaching. Should any tax cuts be announced, these will likely be balanced against savings elsewhere in the budget, but investors will be watching carefully.”

Business support and tax relief

The Chancellor has signposted that anything he does do is about generating growth in business. Among these measures might be an extension to full expensing tax relief for companies. When it was originally announced the Chancellor did suggest he would like to make this relief for qualifying capital expenditure permanent but at this point in time he is more likely just to extend this beyond the original date of March 2026.

In a bid to encourage companies to make more investments, in the Spring Budget the Chancellor announced that full expensing - a tax relief that allows companies to claim 100% relief on capital expenditure, such as plant machinery, IT equipment and commercial vehicles - would be available to claim until 31 March 2026. It replaced the Super Deduction (tax relief on 130% of qualifying capital expenditure when corporation tax was 19%).

We should also have an update on the consultation to merge the SME R&D scheme with R&D expenditure credit (RDEC), with the new scheme being more aligned to the large company RDEC scheme.

Many innovative SMEs benefit from R&D tax relief and so the proposals to merge that into a single scheme that mirrors the large company scheme will have a potentially significant impact on SME businesses currently claiming R&D.

Many businesses will be hoping for an extension to support measures for energy and business rates relief.  For business owners, 2024 could see even more pressure on costs given the energy support for non-domestic customers is set to end in March 2024 and the business rates relief for qualifying sectors is also set to end in April 2024.

We’re concerned that in the absence of an extension to support measures we’ll see SMEs in certain sectors having a really difficult time next year with more businesses not being able to cope with the increased costs. Meanwhile, the National Minimum Wage will rise again in April (with the headline rate expected to increase to more than £11 per hour, up from £10.42), meaning businesses could also see their wage bills rise.

While we are not expecting any significant tax announcements in the Autumn Statement, there are some potential announcements, or lack thereof, that could have a significant impact on particular businesses and individuals.