While the Autumn Statement on 22 November is not meant to be a tax setting event, the Chancellor has indicated policies to drive business investment and productivity will be the priority
As growth stalls, accountants and business leaders are calling for an extension of the current three-year expensing regime for investment in plant and machinery which is due to expire in 2025, stating that it would have a significant positive impact on business investment and growth.
‘Many businesses would like to see the relief made permanent, as it would allow more time to plan and covering longer term, staged investment,’ said Chris Sanger, EY’s head of tax policy. ‘However, this would mean a larger cost to the Exchequer and require the Chancellor to dip into the additional reserves created by the higher than expected recent tax receipts.
‘Following a prolonged period of economic turmoil, the delivery of permanent full expensing would provide businesses with the confidence to make long-term UK investments beyond 2026.’
While support for business is the priority for accountants, the general view is that the Chancellor Jeremy Hunt will hold back any possible personal tax changes until the Budget in March.
Charlotte Sallabank, tax partner at Katten Muchin Rosenman UK LLP, said: ‘While the Chancellor has stated that he is not in favour of a high tax burden, given the current geopolitical and economic issues across the world, it may be hard to justify a reduction in tax. He is more likely to save any tax cuts for his pre-election spring Budget.’
This view is echoed by a number of accountants although the Chancellor is understood to have around £10bn to use for tax cuts.
Colin Graham, head of tax policy at PwC, said: ‘The Chancellor has been at pains to manage expectations ahead of the Autumn Statement, stressing that there’s no room to deliver tax cuts until the economy improves.
‘While any immediate blockbuster tax changes are seemingly off the table, recent lower than expected public borrowing figures and higher than anticipated tax receipts alongside signs that inflation is being brought under control may provide a little wiggle room.’
There are also calls for an extension business rate support for smaller businesses, which could boost productivity.
“It’s possible that we may see some form of relief for the smaller businesses set to be hit by next year’s business rates revaluation,’ said Graham.
Becky Bowness, head of tax at Armstrong Watson said: ‘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.’
Few people expect any changes to inheritance tax, but more an indication of longer term policy. While the tax is universally unpopular, it raises around £7bn a year, a figure which is growing annually, and is only paid by around 3% of estates. However, there is widespread criticism of the flat 40% tax rate on assets so this could be reduced as a first step to future reform.
Armstrong Watson Financial Planning and Wealth Management’s head of advice, Justin Rourke, does not expect a change now, but rather ‘some signposting of future change - either an IHT rate reduction or perhaps the planned abolishment of IHT altogether’.
There has been talk of potential ISA reform to increase investment in stocks and share ISAs.
‘To make the ISA regime more accessible, the Chancellor may raise the longstanding £20,000 ISA allowance and encourage domestic investment by introducing an additional ISA allowance specifically for investment in UK businesses,’ said RSM head of tax Ali Sapsford.
Gary Doolan, financial adviser at MHA, doubts whether an increased ISA allowance will boost investment in UK companies. ‘It is very questionable whether increasing the allowance will boost investment in UK companies, as the Chancellor may intend.
‘With 65% of ISA funds in cash and current elevated savings rates, many may favour cash ISAs over stock market volatility. Furthermore, global institutional investors have reduced UK allocations in recent years, citing limited growth compared to overseas markets. Increasing ISA allowances in a bid to boost investment flows into UK companies is very unlikely to alter this sentiment.
‘The likely announcement for greater flexibility when choosing an ISA manager is more positive. Such a move will enable investors to diversify funds across multiple providers in the same tax year, enhancing competitiveness with Cash ISA rates and giving holders greater control.’
Justin Rourke, head of advice at Armstrong Watson Financial Planning, added: ‘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.’
Tackiling the skills shortage is another priority – a view echoed by CIMA chief executive Andrew Harding, who called on the Chancellor to ‘tackle the skills shortage by fixing the apprenticeship and skills system. Make it accessible and inclusive for employers of all sizes, for school leavers and for those already in the workforce looking to re-skill’.
Cryptoassets is an area where the current tax regime could be tightened up. Sallabank said: ‘While HMRC has published detailed guidance about how to treat cryptoassets for tax purposes, there is currently only one piece of cryptoasset-specific tax legislation; current tax legislation is geared towards traditional assets which have different characteristics to cryptoassets.’