The Daily Telegraph
Will you benefit? The taxes Chancellor could cut in the Autumn Statement
Jeremy Hunt has argued that tax cuts are needed to get the British economy “fizzing” again, but the exact measures he will announce on Wednesday remain closely guarded.
The Chancellor used an interview with The Telegraph on Saturday to make clear that now was the time to show the public there was a “path” to low taxes. But the message is nuanced and caveats exist. The Chancellor has set guidelines on which tax cuts he will consider. Firstly, they must not fuel price rises. Inflation is still 4.7 per cent, higher than the 2 per cent target. Secondly, they cannot be paid for by borrowing. And thirdly, they must help with the stated ambition for this Wednesday’s Autumn Statement: boosting long-term economic growth.
So, what are the options being looked at and which are the most likely to be announced?
Business investment tax
Top of the list of expected tax cuts is an extension of the so-called “full expensing” scheme that Rishi Sunak has championed. It allows companies to claim back 25p for every £1 invested in the UK, which means things like building factories and buying equipment are made cheaper.
Both Mr Hunt and Mr Sunak have previously stressed they want to prioritise business taxes when there is money to spend, since it has a more direct impact on economic growth.
Currently, full expensing is due to end in April 2026. Mr Hunt wants to extend the scheme and, in an ideal world, make it permanent. But it is costly, at around £10billion a year.
There can be little doubt now that Downing Street has an interest in announcing an inheritance tax cut before the next general election, expected in autumn 2024. The key questions are when such a move could happen and how far it would go.
Cutting inheritance tax this Wednesday has been closely examined, with a reduction in the 40 per cent rate – perhaps to 30 per cent or 20 per cent – explored as an option.
Inheritance tax was paid by just 4 per cent of estates in 2021. It may be harder to draw a direct link with boosting economic growth than with other potential tax cuts.
Downing Street could choose to wait until the Spring Budget – closer to the next election – to go the whole hog and abolish inheritance tax entirely, at a cost of around £8billion a year.
One of the reasons an inheritance tax cut has been looked at closely is Treasury officials deemed it was unlikely to drive up inflation. Few families will immediately sell the home they inherit and blow the lot, went the argument. But can the same be said for income tax, an option The Sunday Times reported was being looked at for a surprise cut that could help millions?
Mr Hunt dropped hints on yesterday’s broadcast round he was lukewarm on such a move, warning against doing anything that fuels inflation. Mr Sunak is on record in the past supporting cuts to the 20 per cent basic rate. He announced it would fall to 19 per cent when Chancellor, in plans now abandoned, and ran for the Tory leadership promising it would fall to 16 per cent by 2029. Another idea which has caught the eye of Downing Street is lifting the threshold for the 40p income tax band. But again, a move in the next spring Budget could be deemed more economically and politically suitable.
A cut to National Insurance rates could, in theory, be more closely chime with this Autumn Statement’s focus on boosting economic growth than a cut to income tax. It is, to coin an old Tory attack line repeated by Labour after Mr Sunak and Mr Johnson’s increase, a “tax on work”. Both employees and employers pay it. A reduction could be framed as helping make work pay. The Sun on Sunday reported a cut to the rate the self-employed pay was an option being considered.
There has been speculation that a stamp duty cut could be announced. In the past both Mr Sunak and Mr Hunt have shown willingness to reduce stamp duty to boost the property market, seen as a critical cog in Britain’s economic growth. Homeowners are also traditional Tory voters. But a challenge on why those paying soaring rents are not getting financial support would likely follow.
Downing Street could wait until next year to go the whole hog and abolish inheritance tax entirely They have shown willingness to reduce stamp duty to boost the property market