What tax changes are coming from the Autumn Budget this week?

The buzz word is stealthily…..

Rather than announce increases to tax rates, the Chancellor, Jeremy Hunt, is expected instead to freeze tax-free thresholds and tax allowances impacting us all.

This could mean that income tax for employees and the self employed, VAT for business owners, NICs for employees, self employed and directors, Capital gains tax and inheritance tax bills will all rise as the tax-free allowances are kept at the same level as now. Freezes in these tax-free allowances may potentially remain for the next five years to help fill the black hole of the UK finances, which is expected to reach £55 billion by 2027/28 as forecasted by the OBR. Big numbers to get your head around hence the blanket increase on all tax rises, even if actioned in a stealth like manner, we will all feel the impact.

According to the Institute for Fiscal Studies, a four-year freeze in income tax thresholds starting in April 2023 at £12,570 will raise almost £30bn a year by 2025-26.

Applying the same principle across the tax system should raise well in excess of another £10bn a year by 2027-28.

Those with the broadest shoulders….

Richer individuals are likely to face some tax increases too, such as lowering the £150,000 threshold at which they pay the 45p top rate of income tax, is expected to move down to £125,000.

Windfall taxes for energy firms?

Hunt is rumoured to be increasing the one-off levy on North Sea oil and gas producers from 25 per cent to 30 per cent, and extend its duration from 2025 to 2028.

Any good news…a rabbit out of the hat?

Hunt has already come out and said that there will be very little good news to share ahead of the Autumn Budget on Thursday, to prepare us all mentally for bad news most likely.

Nevertheless, there are three potential silver linings where Hunt has the choice between politics and economics.

First - he is likely to say that benefits will go up in April in line with September’s 10.1 per cent inflation rate.

The triple lock, which raises state pension in line with the highest of either inflation, average earnings or 2.5 per cent — is expected to be safe at least until the next election.

Second - government borrowing costs are falling gradually. If this trend persists, the OBR forecast for the public finances in the spring should be more favourable.

And last but not least - Hunt will give some indication of the government’s proposed replacement for the cap on household energy bills that expires in April. He is expected to replace universal support for households with a new scheme focused on help for the elderly and vulnerable. Not really sure about the rest of us - let’s wait and see.

We will keep you updated over the next week on how the tax changes will impact you and your business and ideas on how we can help.