Autumn Statement/Budget – will we see fireworks?!
NOVEMBER 2022, BY IAN KELLY (TAX PARTNER)
Remember, remember the seventeenth of November……….
It seems somewhat pertinent to use the Bonfire Night analogy with the Autumn Statement on 17 November rapidly approaching and which, we have been warned, will carry “full” Budget status. We will remember it, therefore.
We have also been primed to expect announcements of public spending cuts and tax rises only a few weeks after Kwasi Kwarteng’s mini-Budget and its giveaways.
This is the first Budget under the Rishi Sunak/Jeremy Hunt axis following on from the Boris Johnson/Sunak; Liz Truss/Kwarteng and Truss/Hunt duets and it’s worth spending just a few moments reflecting on the changes in the inhabitants of numbers 10 and 11 Downing Street that the volatility of British top-end politics has brought us.
It is also the case that Sunak himself, similar to Kwarteng and his additional 45% higher rate of tax abolition, had pulled his own rabbit out of a hat moment in his last Budget by announcing a 1% reduction in the basic rate of tax before the end of this government.
Hunt is already up and running of course after his “emergency” intervention post-Kwarteng to shore up both the UK economy and Truss and we await signs of what synergies he and Sunak have.
We’ve already been tipped off that the won’t-go-away-on-its-own £50bn “black hole” is more or less split £25bn spending cuts and £25bn tax rises and that all of this is set against the background of a 10.1% inflation rate; a surging cost of living crisis and the “elephant in the room” of energy prices.
Just when Truss seemed to have found her resolution to this problem, Hunt came along and announced things would change come April 2023.
Sunak and Hunt will also have one eye each on the Conservative General Election Manifesto that trumpeted that there would be no increases in taxes and National Insurance in the lifetime of the government. It is hard to believe that this commitment won’t bite the dust. The saying that a week is a long time in politics has been found to be the case and the World as-a-whole has changed in so many ways since the last election.
What might we see or not see on the 17th?
Pundits and commentators always try to take the Chancellor on ahead of a Budget and this time is no exception.
Freezing of personal tax allowances, tax rates and bands beyond 2026? A certainty one would say.
Increase in the 45% tax rate to 50%? Would satisfy the ‘wealthy should pay more’ argument, but contentious.
National Insurance Contributions (NIC) increase? Sunak’s health care levy has been partially unravelled. Will there be more and what about a long-touted imposition of NIC’s on close company dividends? Hard to see some tweaks (increases!) not happening.
Capital Gains Tax (CGT) rates increases or alignment with income tax rates? CGT rates are perceived to be artificially low and so might be under threat, again maybe using the ‘wealthy pay more’ argument.
Abolish higher rate tax relief on pension contributions? This one has been around a long time and has always survived so as to encourage making provision for one’s retirement. It might live to fight another day – or might there be a bespoke 30% rate?
Abolish “non-dom” status and rules? Like CGT, this would be an easy win and would give Sunak the chance to say once again that his wife is no longer using this status.
A Wealth Tax? Is around in some European countries but a long shot in the UK given the alternative of increasing income tax rates.
Increase in standard rate of VAT? In times of old this might have ranked highly but in wanting to encourage growth, and with wallets and purses hardly overflowing with cash, exceedingly unlikely. Excise duties might come into play, however.
Scrap VAT on power? Contentious but might find its way in as a bit of a sop given the overturning of Truss’s Energy Price Guarantee and no replacement having been offered?
Windfall tax on energy companies? Hard to see how this wouldn’t happen.
All will be revealed on the 17th!