The annual Autumn Statement will be delivered by Chancellor George Osborne on Thursday. Originally seen as a ‘mini budget’, the Autumn Statement has taken on greater significance over the past few years, often including major announcements which affect everyone’s finances.
So what does the Chancellor have in store for us? We’ve rounded up the latest rumours and predictions; although only time will tell whether or not they are the same measures Mr Osborne has in mind for Thursday.
Income Tax, Personal Allowance to rise?
As the cost of living continues to rise, with many people arguing that the ‘man in the street’ isn’t benefiting from the economic recovery, we may see the Chancellor increase the Personal Allowance again.
The Personal Allowance, the amount which you can earn before paying tax, has risen steadily under the coalition government and could increase yet further.
Any rise in the Personal Allowance will of course need to be paid for and it’s not a small bill; £2.5 billion according to one estimate for an annual increase of £500 per person. It could mean a further reduction in the higher rate tax threshold, effectively redistributing wealth from the ‘higher’ paid to those on lower incomes.
Changes to ISAs?
Despite David Cameron saying in 2009, “We need to make a really big change: from an economy built on debt to an economy built on savings” this Government has so far done very little to directly help savers.
In fact, the pressure group, Save our Savers, claims the real value of savings has fallen by 16% over the past five years and the level of saving is once again falling.
Simon Rose of Save Our Savers said: “The future of saving is precarious. What rational young person would opt to save when, at every turn, they see the borrower get the lollipop and the saver the stick? Unless this government acts soon, they risk not only damaging the nascent recovery, but the future financial health of Britain for a generation to come.”
To help savers, there have been calls for the ISA (Individual Savings Account) allowance to be increased to £20,000. In our view this is highly unlikely, as is an increase to the Cash ISA allowance, to parity with that for stocks and shares.
On the other hand, some people have suggested the maximum amount savers and investors can hold in ISAs, be limited, with the cap set as low as £100,000.
The best savers can probably hope for is no change to the current ISA rules and look forward to 2014 without the Funding for Lending scheme, which will hopefully push up savings interest rates.
Following the consultation announced in the Budget earlier in the year, we could see measures to merge the benefits of Child Trust Funds with Junior ISAs, creating a level playing field for all junior savers.
Stamp Duty reform?
The property market has already been boosted this year by the Help to Buy and Funding for Lending schemes.
Despite calls for measures to slow down the property market, indeed the Funding for Lending scheme will no longer be available to mortgage lenders from January next year, there have been predictions Stamp Duty will be reformed in the Autumn Statement.
The Telegraph reports that PricewaterhouseCoopers (PwC) has called on the Government to reduce, by 1%, the Stamp Duty on homes bought for between £250,000 and £300,000. Currently homes purchased for £250,000 to £500,000 attract Stamp Duty at a rate of 3%.
According to PwC such a move would cost around £150 million, from total annual Stamp Duty receipts of £5 billion.
On the other hand, there have been calls for the Chancellor to increase Stamp Duty for larger homes and buy to let investment properties.
Tax rise for buy to let landlords?
Last week a report titled, “Why But to Let equals Big Tax Let-off”, by the Intergenerational Foundation think tank, claimed that tax deductible expenses, such as interest payments, insurance and other fees were costing the taxpayer £5 billion per year.
Buy to let landlords have never been the most popular group of individuals and reducing the reliefs which can be deducted from the rent before tax is due, would be a popular move in many quarters.
Pensions to be hit?
Hardly a Budget or Autumn Statement goes by without the Chancellor, both of a blue and red persuasion, tinkering with pension rules.
This year, there have been suggestions Mr Osborne could cut the tax-free lump sum available at retirement, or reduce higher rate tax-relief on contributions.
Whilst the tax-free lump sum has been left largely untouched in previous Budgets, despite an overall cap on the maximum amount allowable in a pension, higher rate tax relief has been slowly eroded, with the maximum pension contribution falling to £40,000 per year from 2014/15.
Only time will tell whether the Chancellor takes further dramatic measures to restrict tax-relief or tax-free cash. Both of which, in our opinion, would further erode the appeal of saving for retirement, just as millions of workers are set to be automatically enrolled into a workplace pension.
Only time will tell…
By this time on Thursday we will know whether some, all, or none of these predictions have come true.
One thing is guaranteed though, we’ll be bringing you comprehensive coverage of the Autumn Statement, explaining how it will affect your finances as we move into 2014.
In the meantime, why not tell us what you think? Do you agree with these predictions? What would you change?
Leave your comments below; we’d love to hear from you.